investor relations response re weekend afr art, page-8

Yes WHB..thanks for your posts.

Whilst we continue to look at VPG at the micro level, keep an eye on the macro level.

The greatest threat to VPG comes from the banks...so let's put ourselves in the banks boardroom.

Fact: The banks are concerned about the quality of their loan book. But, in tough times their book cannot be as strong as in the good times unless we had a masive influx of cashed up "aliens" arrive. (Maybe SB2000 is the agent for these cash up extra-terestrials?)

So the banks commercial books will be impaired that's a fact...but study the LVR ratios and compare them to domestic lending.

A risky LVR for commercial is around 65%...yet they lend up to 80% against domestic homes.

Who has the greater likelihood of revenue stability?

I'd say the professional REITS surely. How many mum and dads would have a two times home loan coverage after they take out all the other home expenses? Not many.

If I was a bank director I'd examine the quality of the REIT management and ensure they are working to a solid "work-out" plan which contained no cash outs to unitholders.

Then I'd leave them be because the problem raging over in "domestic book" land is far greater when one looks at the 80% LVR's (and there are a stack of them) usually out in the new 'burbs where mortgage stress is through the roof.

These people are struggling to have a 1X ICR and with LVR's that may now see the bank not just with a weakened security position but "out of the water" literally to a portion of the loan.

I just don't see the banks having the resources to open up "loan fights" on too many fronts.

That said, aren't they best to leave REITS with professional management and guaranteed revenue flows that have an acceptable ICR, alone?

If anyone has any insights into what happens at the lofty level of the bank boardrooms, I'd be pleased to hear.