Brendan Investments Managing Director, Vincent Regan, addresses some issues raised in media commentary on Brendan Investments

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Brendan Investments Managing Director, Vincent Regan, addresses some issues raised in media commentary on Brendan Investments.

"Media reaction to Brendan Investments has been positive but as the structure of the investment is new, some errors have occurred in some of the commentary on the product. I want to clarify a number of these points for our investors. "





"The report commissioned by the Board from CBRE and included in the Company’s Prospectus is from 2006 and property markets have changed since then. "
 
VR Responds:
The process by which the Company’s Prospectus was approved, as complying with the EU Prospectus Directive, was quite a lengthy one.  The Prospectus contains the original CBRE report from 2006. 

However, the Directors commissioned an updated report from CBRE which was completed in August 2007. This updated report is contained in the supplementary prospectus and this has been made available to our investors through the Brendan Investments website. Click here for the 2007 CBRE Report
 
The updated 2007 report confirms the Directors’ investment strategy, including its strong emphasis on the German property market.  Caution is required on the timing of entry into Irish development projects and, to a lesser extent, on UK investment property. Our investment strategy covers a 7 to 10 year period.
 
The investment strategy envisages that just 5% of the Company’s funds would be invested in development projects in Ireland.  CBRE, in their updated 2007 report confirm that there may be opportunities in Ireland during the investment period (7 to 10 years).  The Directors do not envisage investing in Ireland in the short term.



"Germany is a bad bet "

VR Responds:
While the Irish residential property may be at the end of its current cycle, this is not true of other markets, especially Germany.
Again this year Germany will see record levels of investment. Jones Lang Lasalle are reporting that investment volume in German commercial property in the first half of the 2007 totaled 27 billion, which is already more than half the total for 2006. They anticipate that the 2007 results will exceed a 50 billion investment in commercial property, beating the record set in 2006. This upward trend is expected to continue into 2008.

Other commentary on the German market:
"In global comparisons, international investors regard Germany as one of the most attractive property markets with high expectations for the future development of the market." (Deutsche Immobilien Partners  Market and Facts 2007)
 
"The German commercial market also continued to see strong investor interest in the first quarter of 2007. Notable deals this quarter include DB Real Estate’s sale of nearly all its domestic properties (61 offices) from its Grundbesitz portfolio for 2.1bn to US investor Fortress. In Düsseldorf, Canadian investor Ivanhoe Cambridge has acquired the Arcadan shopping centre for 174m. Meanwhile the prime mixed-use development Maximilianhöfe has exchanged hands with Irish investor Quinlan Private, paying Doughty Hanson & Co 270m for the development and reflecting a net initial yield of 4.15%. Moor Park Real Estate has bought a portfolio of 91 hotels, comprising 72 hotels in Germany and 19 in the Netherlands, from Paris-based Accor for 863m." (DTZ Research  European Quarterly - May 2007)

"Germany and the Netherlands saw increases in activity in the first half of 2007 with both markets predominantly driven by foreign buyers attracted by pricing levels in those countries." CBRE

The German property market is now strong and liquid, with both buyers and sellers active in the market. 



"Bank Deposits are better investments than European commercial property for the next ten years"
 
VR Responds:
Property investment, through a balanced portfolio of properties in selected markets, remains a very strong investment proposition which the Directors believe will generate excellent returns for our investors and outperform both cash deposits and inflation by a very significant margin.
 
Long term, property investments have outperformed inflation by a considerable margin, especially where such investments are geared, as Brendan Investments is, at 75%. The return from cash deposits rarely matches inflation.  Central Bank reports show that half of the 70 billion held in cash deposits earns interest of under 2% pa. 



"Is the annual management fee deducted from the equity invested by shareholder/investors in Brendan Investments?"
 
VR Responds:
No. It will be deducted as an operating expense from the Company’s annual income. The management charge is not deducted from the equity an investor invests.



"How does the 1% Annual Management Charge compare?"

VR Responds:
An annual 1% management charge is required to meet the operating and administration costs of the Company in executing its investment strategy and managing its investments.  It compares very favourably with other European property companies.
 
A number of examples illustrate this point -  
 
CLS Holdings plc  a UK plc (Annual Report & Accounts 2006) - charged an administration charge of 1.75% of the value of its property portfolio;

CA Immo an Austrian plc (Annual Report 2006)  - has an administration charge of approx. 1.2% of the gross asset value of the company.  This charge does not include the management of its property portfolio.
 
Unlike Brendan Investments, neither of these companies are involved in a significant level of development projects and therefore they have a substantially lower cost base.
 
There are many other examples available by comparing administration costs against gross asset values on the EPRA Eurozone Property Index.
 
Some of the media commentary on Brendan Investments costs has identified this -  "Brendan Fees at 1% would not raise any eyebrows within the industry as some charge as high at 2.5%." Sunday Business Post, Sept. 2007

Many Irish property syndicates, either through the main financial institutions or other promoters, charge from 1% to 2.5% pa of the Gross Asset Value and typically these are only from commercial type investments products.  Typically, they do not include any development projects which involve higher costs associated with due diligence, project selection, and project management.



Entry Fees and hidden up front costs
 
VR Responds:
A significant area of cost for investors can be fees and deductions made from the initial investment.   This can range from 3% to 11% of the initial investment.  Investors in Brendan Investments are not levied any entry fees or other up front charges on their initial investment. Not alone do such charges reduce the amount actually invested, they also reduce returns over the life of the investment. 



"The Company is unregulated."

VR Responds:
Although  Brendan Investments is itself an unregulated entity, the prospectus has been drawn up in accordance with Part V of the Investment Funds, Companies and Miscellaneous Provisions Act 2005, Part 5 of the Prospectus (Directive 2003/71/EC) Regulations 2005 and Commission Regulation (EC) No. 809/2004 - the EU Prospectus Regulation. Accordingly the Prospectus and the Supplementary Prospectus have been approved by the Financial Regulator (being the competent authority for Ireland) in accordance with Part 7 of the Prospectus Regulation 2005 and have been filed with the Financial Regulator accordingly. The Financial Regulator only approves the prospectus and Supplemental Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive 2003/71/EC.
 
The Company’s Plc structure provides investors with a high level of transparency and shareholder control on the Company’s performance.  This plc structure is superior to non-transparent offshore private companies, un-audited unit trusts, or life insurance unit linked funds that wrap property schemes, adding an extra layer of costs that investors rarely see.

The Company will comply with the best Corporate Governance standards expected of an unlisted plc.
 
Similar to most other plc companies, Brendan Investments Pan European Property plc is not itself regulated by the Financial Regulator.



"There are set up costs for the company "
 
VR Responds:
There are costs in establishing Brendan Investments and bringing its offering to the market.  However, these costs are capped at approximately EURO 750,000 and have been bench marked against all possible fees that could arise in achieving a target of 50m. It is important to recognize that this maximum amount is to meet directly invoiceable costs only - no part of this amount is payable to the Directors of the Company.
 
In addition, there are no upfront commission charges  which typically range between 3% and 5% for other products.



"The Directors will be paid fees"
  
VR Responds:The Company’s Prospectus clearly states that the total amount payable in Directors Fees is expected to be EURO 150,000 per annum. This is payable to the Company’s five Board Directors and is not excessive.



"The Directors could get Share options"
 
VR Responds:The Directors do not wish to seek share-options.  However, any decision to provide a scheme of share options would require the approval of the Company’s shareholder/investors in a general meeting of the Company.