Trust loses faith in economy
East Coast Mortgage Trust CEO Scott Collis said the board's decision to wind down the Lismore-based institution after 50 years was incredibly sad but there was no cause for investors to panic.
Mr Collis said after much deliberation the board decided the only responsible course of action in the current economic climate was to slowly wind down the $150 million trust and return capital to investors. He said the 3700 investors, almost exclusively in the Lismore, Ballina and Byron LGAs, would receive 90% of their investment with the board allowing for a potential 10% loss for property sales during the wind-down period.
The first payments to investors will be distributed in March.
"It's been very difficult… the board and staff have strong emotional ties to the area, with most being long-term residents, with their own finances invested," Mr Collis said. "Since the GFC and the (federal government's) bank guarantee a few years ago all mortgage trusts, nor just us, have struggled. In more recent years factors such as challenging property and credit markets have seen the operating landscape for Australian mortgage trusts deteriorate.
"The board formed the view the situation is unlikely to improve… We decided it was best to give the investors a clear direction. We need to get the best possible outcome for investors in the shortest possible time."
Mr Collis said the projected 10% loss was based on a worst-case scenario given the current property market wasn't buoyant and the board was trying to be prudent by allowing for that loss.
He conceded it was better to begin winding down operations now than try to push on in uncertain economic times and put investors at risk of facing a greater loss. He said investors had been kept abreast of the situation and as a result they were taking the news reasonably well under the circumstances.
"So far the feedback has been calm and reasonably positive in so far as they understand the situation and the difficulties we've faced," Mr Collis said. "We've been very open with investors and provided a lot of information over the year about our direction… I think they appreciate there's a decision, albeit not a positive one."
The wind down could take more than a year as East Coast Mortgage Trust gives clients time to refinance and attempts to sell properties, but Mr Collis said slow and steady was the pragmatic approach.
"We're not talking about fire sales or things getting dumped on the market," he said. "The board is weighing the need to get an orderly wind down in a reasonable time period while getting best result for investors."