Current state of the Trilogy Monthly Income Trust’s loan portfolio

To provide further insight into the current state of the Trilogy Monthly Income Trust’s loan portfolio, Business Development Manager – Wholesale Investments, Wyatt Leonard sat down with our Head of Lending, Clinton Arentz. Tune in to the below video where Wyatt and Clinton discuss everything from construction delivery to sales rates and how the portfolio continues to provide investors with investment income, despite the wider economic effects of the COVID-19 pandemic.

Video transcript

Wyatt Leonard (WL): Hi, my name is Wyatt Leonard and I’m the Business Development Manager for Wholesale Investments at Trilogy Funds and today I’m joined by Clinton Arentz who is our Head of Lending and Property Developments to discuss the current state of the loan portfolio for the monthly income Trust.

Now my first question is in regards to the construction delivery of these loans. Have there been any supply chain disruptions experienced so far?

Clinton Arentz (CA): Good morning Wyatt, its nice to talk with you again. Well we’re actually seeing supply chains and delivery systems holding up really quite well given the circumstances. Suppliers we talk to and sub-contractors we’ve been in touch with continue to work through this current process albeit it having usually expected COVID-19 working practises which are also adopted on construction sites as well as in supply depots and things of the like. Interestingly all of our consultants have reported that they’re operating as usual remotely albeit but operating well both valuers and quantity surveyors have access to those sites and continue to do their weekly and monthly checks so, so far so good with respect to supply chain continuance thanks, Wyatt.

WL: And how is the actual construction on these sites progressing?

CA: Well we’ve looked at that very closely, to see if our projects or any or any of them might be adversely affected, we’ve looked at their particular supply lines and builders and sub-contractors, trades and delivery systems and so far we’re pleased to report very little effect through the portfolio and in addition the government have both come forward, both federal and state, to provide support for the construction industry both with respect to opening up construction sites, longer work hours and a whole range of other provisions giving the construction industry priority status and we were pleased to see that. And, of course, many of the projects in our portfolio are smaller projects, infill projects and the like that are less affected and in particular some of the types of projects we do, mainly land subdivisions, completed stock and some smaller commercial projects are also well placed to work their way through this period with minimal disruption.

WL: And the next step would obviously be selling that underlying stock. How are the sale rates holding up so far?

CA: Yes Wyatt, it’s a good question. We’ve looked a lot at that. We’ve got sales coming through the system every other day and settlements occurring as a result of that and therefore repayments. So far we’re seeing that track along quite nicely. Indeed if anything, people have really risen to the occasion, the solicitors are behind it, the real estate agent community are all really adopted virtual practices really quickly and we’re actually seeing good support with respect to both sales rates and we’re seeing settlements with individual purchasers still occurring albeit with some minor delays here and there as you might expert in the circumstances.

WL: And are the valuations shifting?

CA: Well from the evidence we have so far, we’ve not seen much shift in valuations. That’s largely because of the type of project we normally are attracted to. Smaller projects, inner-city projects which have good valuation support and across our portfolio at this stage we’re pleased to report there’s minimal impact with respect to valuations but it’s early days and the market needs to work it’s way through this period so we fell our projects are quite well placed at this stage.

WL: And from your point of view, has the lending environment changed significantly as a whole?

CA: Well it has Wyatt. But, in particular our team of funders is well buttressed, both in sectorial and geographical diversity, we’re spread across the three primary states, QLD, NSW and VIC and of course our product type is spread between residential apartments and townhouses, land subdivisions as I mentioned earlier, smaller construction projects, commercial and industrial, and so it’s a nice diversified spread of projects so at this time, our loan book continues to hold up quite well we believe and existing loans are continuing to progress along ok and of course our portfolio managers take a great interest in watching that and maintaining close working relationships with each of the borrowers. In addition, we expect, to maintain and perhaps increase our competitiveness in the market place moving forward and we’re seeing the flight to quality, from various borrowers seeking stronger, more experience lender groups such as Trilogy, and we believe there is a very good future ahead for our lending model.

WL: And, you’ve touched on it briefly there but how has Trilogy responded to the changing environment?

CA: Well quickly and effectively I think is the short answer. In particular we were mobilised for our remote operating locations quite quickly, and with new software that exists, that’s working extremely efficiently as possible for each state. We’re continuing to see a good flow of quality loan inquiries, particularly from experience developers and the like, and as the lending market consolidates somewhat over the months ahead, we’d expect to continue to see those quality transactions being presented to us as we undertake some of those loans moving forward, we look to strengthen and improve the quality of the loan portfolio.

WL: That’s all my questions for today Clint. Thanks so much for your time, those insights are really helpful.