Jonathan Street

Leading independent property lender specialising in commercial and residential mortgages, Thinktank, has successfully closed its first residential mortgage-backed securities (RMBS) issue in 2024 totalling A$750 million.

This RMBS issuance marks Thinktank’s 15^th transaction since commencement of the business in 2006, demonstrating the company’s scale and market prominence.

Due to strong investor demand, the launch size of A$500 million was upsized to A$750 million, with the final order book 1.5x over-subscribed and exceeding A$1.1 billion.

As an established issuer in capital markets, this transaction takes Thinktank’s total securitisation issuance to A$7.5 billion.

Thinktank CEO Jonathan Street said: “The transaction represents a strong start to the year for ourselves and the market generally, underscored by keen participation from both existing investors while also welcoming a number of new investors into our RMBS program.”

The final order book attracted interest from 22 institutional investors, with 60 per cent representing domestic accounts with 40 per cent from offshore participants.

Bank balance sheets accounted for 61 per cent of the final order book, with real money investors comprising the remainder.

Pricing details were disclosed across the capital structure, with the S&P and Fitch AAA rated Class A1-S Notes set at a margin of +0.90 per cent above the 30-day Bank Bill Swap Rate, the AAA rated Class A1-L Notes at 1.35% per cent and the AAA rated Class A2 Notes at +1.50 per cent. Notably, the Class A1-S, Class A1-L and Class A2 Notes priced in line with the initial price guidance at launch, reflecting a positive market reception, while the demand for the Notes further down the structure saw associated margins tighten at the left hand side of the initial guidance ranges due to strong investor interest.

The pool of 1,200 first mortgage loans with an average size of $624,982 while 94.0 percent of properties were in major metropolitan areas with 6.0 percent in urbanised non-metro locations.

The successful bond issue highlights the sustained quality of Thinktank’s commercial and residential loan books over the long-term.

Mr Street concluded, “we continue to maintain a positive outlook for the SME and the self-employed sector despite the persisting challenges of higher interest rates and we remain committed to continuing to expand our support for this critical part of the Australian economy.”

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Nathan brings over 25 years of deep experience in retail banking, with a proven track record of transforming businesses through leadership across roles in Product, Digital Transformation, and Risk. His expertise spans local and international appointments, covering both domestic and global firms, public and private ownership, and small and large financial institutions.

Nathan joins Thinktank from Great Southern Bank, where he served as the Product Lead for Home Lending, overseeing the bank’s mortgages portfolio. Prior to this, he held the position of Head of Product and Growth, Mortgages at ING, where he led the core mortgages product team with a focus on acquisition performance, financial oversight, credit risk appetite and decision automation.

Before his time at Great Southern Bank and ING, Nathan spent 14 years within the Westpac Group, holding various leadership roles. As the Head of Portfolio and Servicing, Mortgages, Nathan led mission critical teams overseeing Product Management, Pricing, Portfolio Management, Remediation, Servicing, and Simplification for Westpac Group Mortgage Portfolios.

Nathan’s dedication to innovation and strategic leadership further unfolded in his roles as Head of Home Ownership for Regional and Retail Brands and Head of Product and Digital for RAMS, where he demonstrated a consistent commitment to delivering business growth while balancing risk management, and the pursuit of exceptional customer experiences.

Jonathan Street, CEO of Thinktank, expressed his enthusiasm about Nathan joining the leadership team, stating, “Nathan’s wealth of experience and proven leadership skills make him an invaluable addition to our team. We are confident that his strategic insights and expertise will contribute significantly to our objectives to drive innovation and excellence across the realms of product, policy, broker experience and the management of credit risk.”

Nathan McMullen’s appointment is effective immediately, and Thinktank looks forward to the significant positive impact he will undoubtedly bring to the organisation.

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Peter Kearns

After a distinguished career spanning more than four decades in the banking and finance industry, Thinktank Property Finance’s General Manager Peter Kearns, a seasoned executive renowned for his defining character and many remarkable accomplishments across multiple organisations, has announced his retirement.

Throughout his career, Kearns demonstrated unparalleled expertise in property finance, evidencing the highest level of professionalism across credit, mortgage administration, product innovation, compliance and strategy. His contributions have been integral to the success of several esteemed financial institutions in Australia and none more so than at Thinktank.

Kearns forged a career path through his leadership in pivotal management roles at Dutch financier AMEV, AMP and Citibank, cumulatively leaving an enduring impact on the industry. Notably, his seventeen-year tenure at Thinktank stands out as a testament to his outstanding skills in commercial and residential lending, where his market insight and commercial risk management truly came to the fore.

Thinktank CEO, Jonathan Street remarked “Peter’s involvement with Thinktank from the very outset of our journey has been instrumental in steering us to where we are today. Looking back on our seventeen years working closely together, the business has far exceeded our original expectations and Peter has unquestionably been a cornerstone of what we have been able to achieve, leading to exceptionally strong portfolio performance through multiple cycles.

“We believe that our success as a non-bank lender is grounded in quality credit management. The fact that we have been able to organically grow our loan book to $5.4 billion while maintaining consistently high credit quality, is largely due to Peter’s unrelenting commitment to prudent lending standards and communicating a consistent, common sense view on credit risk appetite”.

Beyond his professional achievements, Peter Kearns has been widely regarded as a mentor to many in the industry. His unquestioned work ethic, integrity, and dedication to coaching and fostering a collaborative work culture have inspired those around him to pursue higher goals and register career success.

Street said “Trust and respect are two words that genuinely characterise Peter. These values have become a true reflection of our business and what we have been able to accomplish over many years. As he embarks on this new chapter in his life, we extend our sincere appreciation to Peter for his invaluable contribution to Thinktank as well as the banking and finance industry at large. His expertise, leadership and unwavering commitment to excellence will be greatly missed but his legacy will remain very much intact throughout our business.”

Reflecting on his retirement, Peter Kearns expressed his gratitude for his rewarding career in the banking and finance industry. He remarked, “My time in the industry has been an extraordinary experience. I am particularly proud of what we’ve been able to achieve together at Thinktank. It has truly been the most gratifying experience of my working life and I have formed many strong friendships throughout my time there. I look forward to this new phase of my life, and to continuing many valued relationships I have formed along the way.”

Kearns’s retirement marks the end of an era in the banking and finance sector, yet his impact and influence are sure to endure.

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Jonathan Street

Leading non bank property lending specialist, Thinktank more than doubled its loan book to $5.2 billion in the past three years to 30 June 2023 – without compromising credit quality.

CEO Jonathan Street said: “Considering much of this period included the COVID-19 pandemic, with its impact on economic, business and social activity, it is a very pleasing result, especially as this growth has not come at the expense of our prudent lending standards and credit policy.”

At 30 June 2023, Thinktank has originated over $5.2 billion of commercial, residential and SMSF mortgages, compared with $2.3 billion to 30 June 2021 – a 126 per cent increase. The loan book was split 66 per cent residential to 34 per cent commercial, with self-managed super funds comprising 24.5 per cent of the total book.

Thinktank experienced historical lows in its arrears during this period, benefitting from reduced interest rates and the Government’s economic stimulus during the pandemic.

Street said: “Arrears remain below historical averages, however we have experienced a slight increase, finishing the 2023 fiscal year at approximately 50bps (0.5%). In addition, there are no loans in the portfolio we expect to incur a loss.”

He stresses that it’s important for investors to compare the performance of loan books and arrears over multiple cycles to get a true understanding of a lender’s credit underwriting standards and the ability to collect on delinquent loans.

“Vintage analysis, looking at the performance of a portfolio in different periods of time after origination, can give investors comfort that a lending business doesn’t compromise its lending standards and credit parameters when an economy is growing or contracting.

“Consistently low arrears can indicate robust credit underwriting, specifically during prosperous times.

“The resilient and continually evolving nature of Thinktank, has helped us to achieve this outcome during a particularly volatile economic period. As a business our strong focus is always on building trusted and enduring relationships across all our broker, aggregator, private investors, institutional stakeholders, and partners.”

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Jonathan Street

Specialist commercial and residential property lender Thinktank has registered an impressive milestone in settling more than $1 billion in loans for the first time in the financial year ended 30 June 2021. The stellar performance represents a 33 per cent increase on loans written in the previous year.

Thinktank CEO Jonathan Street said: “Considering the ever-present factor over the past 12 months has been the COVID-19 pandemic and the impact it continues to intermittently have on economic, business and social activity, this is an outstanding result.”

“It speaks to the continually evolving nature of Thinktank as a business and our genuine focus on building trusted and enduring relationships across all of our broker, aggregator and institutional stakeholders and partners. We have continued to consistently grow our originations as a result and our distribution relationships continue to expand, both in terms of size and effect.”

Street says Thinktank’s moves to progressively diversify over its 15 years from its initial focus on commercial property finance into SMSF and broader residential lending focussing on self-employed and SME borrowers has served the business well and particularly so in the past financial year.

“I think it’s fair to say that 12 months ago as the grip of Covid was tightening and with borrower hardship support at elevated levels, none of us genuinely believed $1 billion was a likely prospect. And yet, while commercial lending activity initially fell by around 50%, it was more than compensated by the pick-up in residential and SMSF lending.

“It is also fair to say that the performance of the residential market, especially when reflecting back on commentary at the time, has surprised just about everyone. While the commercial property market generally has recovered well in the time since, individual market segments such as industrial have remained solid throughout and significantly exceeded expectations on the upside.

“Although the re-introduction of widespread lockdowns does produce renewed challenges for borrowers, businesses, lenders and property markets, we remain confident about the outlook for period ahead and anticipate another record year.

Lender competition is particularly strong which is great for borrowers and brokers, while interest rates are now likely to remain at their lows for longer. The impacts of Covid will abate in time and that is expected to unlock a sustained period of strength in employment, the economy and in property markets.”With 125 employees, Thinktank is a specialist commercial, residential and SMSF property lender commencing operations in 2006 with offices in Sydney, Melbourne and Brisbane, and to date has advanced almost A$4 billion in mortgage finance to Australian small to medium sized businesses, self-employed borrowers and property investors.

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Jonathan Street

Investors have been the beneficiaries of specialist commercial property lender Thinktank’s decision to establish two investment bond trusts as an alternative to bank financing as a capital source for its commercial lending.

On the one-year anniversary of the two funds, investors in the High Yield Trust have enjoyed returns ranging between an effective 8.48 per cent to 7.55 per cent, while in the more conservative Income Fund yields have ranged between an effective 5.58 per cent and 4.65 per cent as official interest rates have declined.

Both funds, which target the wholesale investment market with a focus on self-managed super fund (SMSF) trustees, have a minimum term of a year, minimum investment of $10,000 and pay monthly distributions.

To date, the Income Trust has experienced nil losses and has no loans it has originated in arrears, while the High Yield Trust also has had nil losses and only one loan in arrears.

The Income Trust loans are secured against first mortgages over commercial and residential property, while the High Yield Trust loans are secured against second mortgage commercial property subordinated to Thinktank’s wholesale funding facilities and term funding in bond markets.

Chief Executive Officer Jonathan Street says: “The two trusts’ performance has met all our expectations since their launch, and we expect them to enjoy strong growth in FUM.

“What these two trusts offer investors is diversification, as well as stable, secure, and competitive returns in a low-interest environment where investors are looking for yield without the volatility of the share market.

“Investors are also reassured by our track record in managing our loan book – it has been growing about 35% a year since 2013 – with our losses since opening the business in 2006 at less than 0.10%, well below the industry average and that of major banks.”

Street says interest in the funds has not been limited to the institutional market. “Although that was our initial thinking and where we focussed much of our attention, we are seeing small institutions, such as family offices and fund of funds, being attracted to the investment profile.

“Property is an asset that is well known and understood by the market, so we shouldn’t be surprised that mortgage-backed bond trusts offering such competitive yields are generating interest in the market, especially when our track record in managing credit risk is factored into the equation.”

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Jonathan Street

The beginning of a recovery in residential property prices should not deflect investors or self-managed super funds (SMSF) trustees from considering the long-term benefits of investing in commercial property, says Jonathan Street, CEO of the specialist commercial property lender, Thinktank.

“Falling residential property prices over the past couple of years has been a good reminder to investors and SMSF trustees that housing has its risks, and that commercial property, in terms of yield, security, and capital gain, has a place in a balanced investment strategy.

“it’s worth remembering that even at these lower prices for residential housing, yields are typically far less than what the commercial sector consistently offers.”

Street highlights the fact that office property remains in strong demand, especially in Sydney and Melbourne, where vacancy rates are still low.

“Although there has been a slight rise in vacancy rates in Melbourne, up from 3.2 per cent to 3.3 per cent, while in Sydney they fell from 4.1 per cent to 3.7 per cent as reported by the Property Council of Australia in their July Office Market Report, the outlook remains very positive, especially for Melbourne.

“The respected consultancy BIS Oxford Economics is predicting a Melbourne ‘office boom’ will continue until 2024, and other market analysts have similar views on the strength of the Sydney market.

“In Melbourne, it’s estimated that the vacancy rate will remain below five per cent for the next five years, and, if this proves to be the case, then rents are likely to grow by 30 to 40 per cent over this period and values to rise by 25 per cent.

“it’s not just the CBD in Melbourne. Demand has found its way into the suburbs where the estimated vacancy rate has fallen to 4.6 per cent.

“Other mainland capital cities are displaying positive signs, with yields tightening in most locations even where the economic fundamentals, such as the resource-driven Perth and Brisbane, remain under some pressure.”

Street says that it’s this generally bullish outlook for office space and other commercial assets such as industrial property that investors and SMSF trustees should bear in mind when considering a property related investment.

“There’s a myriad of options to invest in the commercial space, whether it be AREITS, unlisted property trusts, property securities funds, property syndicates or mortgage funds such as our Income and High Yield trusts. Always invest with caution but the fundamentals and relative yield offered by commercial remain accommodative.”

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Jonathan Street

The Labor Party has been urged to rethink its policy of banning Limited Recourse Borrowing Arrangements (LRBAs) in the wake of its electoral defeat on 18 May.

Jonathan Street, CEO of the specialist commercial and SME property lender Thinktank, says banning LRBAs was always a “blunt instrument” for cleaning up that small element of the market where this debt instrument may have been an ill-advised investment.

“The facts are that the evidence has never supported the arguments for abolishing LRBAs. Even the recent Council of Financial Regulators (CFR) report, “Leverage and risk in the superannuation system”, which recommended the banning of LRBAs, could not provide any support to suggest they were a systemic threat to the superannuation system.

“The report also acknowledged that such a ban could adversely affect self-managed super fund (SMSF) trustees who use LRBAs as part of their wealth management or retirement strategy, limiting their capacity to invest in a particular property such as their own business real property (BRP).”

Street says Labor has announced that it will revisit its proposal to abolish franking credit refunds, and LRBAs should become part of this discussion.

“If Labor wants to reach out to the small business community, in particular, taking the abolition of well-managed, well-regulated LRBAs off the policy table would be an important step in that direction.

“Instead of focussing on the errant behaviour of a minority who haven’t acted in their clients’ best interest, Labor should appreciate how LRBAs play an important role in the self-funded retirement plans of so many self-employed families, the vast majority of whom couldn’t be further removed from the “top end of town”.

“As Thinktank has said before, the legislation is already there to crack down on those doing the wrong thing. All that’s required is for the regulators to effectively enforce the law.”

The Federal Government has announced it will ask the regulators to review LRBAs over the next three years. “It’s to be hoped that this review will look at all the evidence in context and not be swayed by SMSF critics who conflate the actions of a small minority to call for the outlawing of LRBAs,” Street says.

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