TV personality and consumer advocate Eddie Hobbs, and his fellow directors, could earn tens of millions of euro in fees from Brendan Investments, the property company whose shares they are offering to the public. Barry O'Halloranreports.
Mr Hobbs, and fellow promoters Vincent Regan and Hugh O'Neill, launched Brendan Investments Pan European Property plc this week, billing it as an opportunity for the public to get involved in syndicated property investment in Europe.
Brendan plans to raise between €50 million and €250 million by selling its shares to the public. It will then borrow three times the sum raised, and use the total, potentially anything from €200 million to €1 billion, to invest in commercial properties, which it hopes it can sell for at least double the investment after 10 years. The venture has put two mechanisms in place that will see tens of millions of euro paid to the three founders if Brendan succeeds. The first is a management company and the second is a bonus fee paid to the three men if the properties more than double in value when the 10 years are up.
According to a prospectus detailing the investment, and lodged with the Companies Registration Office, Brendan Investments will pay a yearly fee equal to 1 per cent of the value of the properties it owns to a management company owned by Mr Hobbs, Mr Regan and Mr O'Neill called Brendan Investments Property Management Ltd.
This means that the fees paid could range from €4 million to €10 million, although this depends on what the venture raises, buys and values over the 10-year period. Mr Regan, who is Brendan's chief executive, said yesterday that the management company's costs will be paid from these fees.
The management company will have the job of identifying properties, valuing them, surveying them, carrying out due diligence and managing them. As 25 per cent of the total fund will be invested in development properties, that is buildings that are being built, Mr Regan said that at least part of the costs involved will be high, as managing these projects is expensive and labour intensive. "They will burn up money very quickly," he said.
Mr Hobbs pointed out that Brendan's structures are transparent, which allows everyone to see who gets paid what. "Some property syndicates look for 3 per cent up front, and we have tried not to do that," he said.
The bonus is payable if the value of the investment increases by more than 8 per cent a year over the 10 years. This means that the investment would have to double in that time: €400 million at that rate would be worth €864 million, while €1 billion at that rate would be €2.16 billion.
If the investments are worth more than this at the end of the period, then the three men will receive 20 per cent of the difference. The remaining 80 per cent will be paid to shareholders, including the trio.
