Bridging & Commercial Magazine — The Deep Insight Issue

The state

of

play

Results of the 2023 EY UK Bridging Finance Market Survey revealed

+ The key to success in a volatile market p18

Get ahead with Fast Track Bridging

the specialist effect

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If I had to describe the first three months of 2023 in one word, it would probably be ‘intense’. While the industry continues to ride the rollercoaster of interest rate hikes and inflation in the double digits, we witnessed two major international banks fall hard. On a more positive note, the specialist finance sector has been buzzing with activity, with numerous firms rejoicing at the high levels of business they’ve seen during Q1. With so much going on, now is the perfect time to take an in-depth look at the state of the specialist finance industry, and that’s exactly what we’ve prepared for you in this issue. Once again, we bring you an exclusive analysis of the bridging lending landscape, courtesy of EY’s sixth UK Bridging Finance Market survey. We’ve dissected all the facts and figures—trust us, there were a lot—to see how the sector has fared over the past 12 months, and what the growth trajectory for this year looks like [p46]. We also lift the lid on the commercial finance space with five experts answering our burning question: is there a light at the end of the tunnel for this market? [p70].

With the recent acquisitions of Silicon Valley Bank and Credit Suisse, it was high time for us to revisit the outlook on M&A in our sector and its impact on product choice and service levels [p26]. And, as we’re close to the sixth year of the Grenfell Tower tragedy, we review where the property market’s at when it comes to fire safety [p62].

With several hard-hitting features over the following pages, we wanted to balance things out with some great success stories: MSP Capital’s head of broker relations speaks to us about how being reliable and consistent helped the lender double its loan book in two years [p18], while Cornerstone Capital divulges the reasons behind its surprising expansion into England [p12]. LendInvest’s new head of bridging Leanne Ardron talks about her extensive career up to date and the value of technology [p56], Memery Crystal’s new partner Laura Brown shares her plans for the company and highlights what makes a law firm great [p84], and MFS’s CEO Paresh Raja showcases how optimism and a will to succeed can get you through the toughest times [p38].

Andreea Dulgheru Deputy editor

p18

In the property industry, the ability to move with speed and decisiveness has always been a strength”

Brokers are unhappy—but why?

Broker satisfaction with lenders has fallen to its lowest level outside the pandemic, a recent study by Smart Money People has revealed. To uncover the reasons behind this, specialist finance intermediaries share the biggest issues they are experiencing with finance providers and how these could be mitigated

Narinder Gill Associate at Coreco Commercial Finance

The volatility and difficulties in maintaining consistent pricing are understandable, but providing an acceptable level of service and adhering to publicised agreements is paramount for all. Instability of swap rates have most definitely contributed towards this; I also think pulling products at short notice can cause a flood of applications, with the quality of submissions naturally declining when brokers submit cases without having clarified the finer details of lending policy beforehand. Lender portals are under huge pressure and being tested to their fullest capacity. I would like to see improvements in the ability to attach/package cases from the outset, with features such as drag and drop and the option to add notes and attachments to submissions. Having direct access to underwriters has never been so important in order to discuss cases quickly and understand any issues for both lender and broker.

Imogen Sporle Managing director at Finanze

Over the past 12 months, my biggest irk with lenders was how little notice they have given when pulling their rates—even more so when they withdrew rates for cases that were being underwritten and where the client had already paid an application fee. Of course, there were also huge issues with service levels, which were frustrating for us and the clients, but also for sellers, as these have been causing long delays. In some cases, clients have lost out on properties because sellers were getting (understandably) impatient. The whole miniBudget fiasco and the increasing base rates caused these problems, and I understand that this forced lenders to pull products and increase pricing— however, even 48-72 hours’ notice would have been enough to please brokers. This is why I think that finance providers should put a rule in place to make sure that, regardless of the circumstance, if they are removing products, an email should go out at least 48 hours in advance to all brokers to make them aware of the change.

In my experience, certain lenders have a communication gap between their deal origination and underwriting teams—the former tends to be proactive in pushing deals forward, while underwriters focus on processing and assessing the risk of the deal. Unfortunately, at some lenders, the handover from the origination team to underwriting can result in the process slowing down, which can negatively impact the transaction. Personally, my main concern is the speed of the process. A bridging loan is typically expected to be fast, but some lenders’ underwriting speeds are more in line with those of traditional mortgage lenders and delays can, ultimately, cause deals to fall through. It is important to ensure that originators and underwriters work collaboratively rather than consecutively. Although underwriters should be incentivised on completion rates to avoid bad debt, it may also be beneficial to consider incentives based on the speed of the process.

James McGregor Director at Mesa Financial

I think the biggest issue we have seen is lenders agreeing DIPs and then declining later on in the transaction. When lenders have all of the information upfront and, once a DIP is approved, there should be no concerns other than the valuation report. The reason for this issue is a mix of trying to deliver on unrealistic lending targets and poor processes. In my opinion, deals should be underwritten upfront and then agreed subject to valuation; with all documents signed off ahead of time, the case can be ready to go to legals once the report has been confirmed. Honesty from the outset around timescales and setting realistic expectations are also important; every adviser would tell you they prefer a fast “no” to a lengthy decision process. It would also be beneficial to have one or two points of contact for a deal. We often have too many situations in which multiple underwriters and case managers are involved, which means the same information is requested regularly—so having one point of contact would solve a lot of problems.

James Mole Director at J3 Advisory

Michael Craig Sales director at Brilliant Solutions

Lenders have been pulling rates and products too quickly with minimal notice, which has created a huge amount of unreasonable pressure on brokers and, of course, clients. This has happened across the market, so the impact is significant. We’ve also seen inconsistencies between call centres, underwriters and BDMs, and even between lenders’ case handlers. While this is not a sector-wide problem, there are many finance providers that still suffer with this, and it is incredibly frustrating as mixed messages always make brokers look bad in front of clients. To fix these problems, lenders must address the funding of fixedrate mortgages to enable more realistic deadlines— this can be done through regulatory enforcement, greater contingencies to enable smoother repricing, or a means of hedging the risk earlier on what would be only a small fraction of that fixed-rate loan book. On top of this, lenders must continue to invest in people to address service issues and train them to higher standards—specialist finance needs great people.

The client, broker and lender all want the deal done yesterday, and everyone else involved in the transaction will moan about speed too. Everything can always be done quicker, and we have found that service at some of the lenders is getting slower—quite often, the reasons provided relate to capacity and the size of the team. However, with the industry being buoyant and resilient, I have seen recent positives. For example, lender portals are improving—the better ones restrict duplication of data entry and allow for smoother communication between broker and underwriter. I particularly see their value in streamlining regulated transactions, where nine times out of 10 there is a black-and-white decision. However, I don’t think we can get away from the fact that an investment deal will always need a human touch and consideration. Proactive relationship managers and BDMs are invaluable, as they will often provide the much-needed link between broker and underwriter.

In essence, we are all in the same boat and I think for some time we have undervalued the skill and expertise required to be a proficient lender and/ or broker. It feels a little unfair to deride lenders as the sole reason for poor service when, collectively, we have faced economic headwinds, a pandemic, and staff shortages. It takes over a year to competently train someone in our field, so responding to stop-start client behaviours is a challenge for any business or business owner. Lenders should communicate more transparently on the problems they face and, equally, set minimum broker standards for packaging to enforce a standardised, quality-focused approach; poor packaging from other intermediaries slows everyone down and is unfair on those committed to quality. Moving forward, I believe we all should take a measured and consistent approach to our environment—let’s just remember to survive with quality central to our values. We have many economic challenges to face, and each one of us surviving is a positive reflection on our market.

Aaron Noone Director at Master Private Finance

Tom Rowlands Sales director at Pure Property Finance

A move into a bigger market

WORDS BY BRADLEY GERRARD

Burgeoning firms often expand into underserved markets, but Welsh bridging lender Cornerstone Capital appears to be going against the grain

Back in February, Cornerstone Capital—the privately funded company which is part of Cornerstone Finance Group—announced it will expand out of Wales and into the competitive English bridging loan market to cover both areas. Its conventional bridging loan products proved popular in its home market, leading to the firm’s decision to roll it out in England. Chief executive Haydn Thomas says the size of the English market made it compelling to target, but there were other factors too. “The main driver was to have an offer that was accessible to the majority of the Cornerstone Network’s appointed representatives,” he says. “It’s fair to say that minimum loan sizes are rising too and, with ours starting at £25,000, we have an attractive offering.”

Not only that, Haydn believes its level of service helps the firm stand out. “We’re very much relationship and repeat business orientated,” he states. “We are focused on the quality of the client; we offer flexibility, good-quality pricing and we’re transparent. When you look at our quotes overall across the board, we are competitive with very big players, and I believe we operate in a far more speedy manner.”

For example, Cornerstone Capital has previously arranged a loan in the space of a week, which Haydn cites as evidence that the firm can move fast for clients when required.

Stepping out

The business has lent £10m so far, with the vast majority of this linked to Welsh projects. While some of the loans were for projects in Cornwall before the expansion into England, Haydn clarifies that these excursions did not directly lead to the move.

“These were attractive deals that we secured via an individual we already knew,” shares Haydn. “They were an exception at the time, but we knew the individuals, liked the property, and we’ve got a pretty good knowledge of Cornwall as two directors have spent a lot of time there.”

The lender is now firmly focused on England and Wales only “for the foreseeable future”, says Haydn, as venturing into Scotland would require a legal firm to draw up fresh documentation.

So far, Cornerstone Capital has had half of what it has lent out paid back by its clients, and expects to bolster its loan book as it establishes its footprint in England. While it hasn’t published its internal targets, Haydn states that a loan book size of £10m in 2023 would be a “minimum goal”.

Network in place

According to Haydn, one advantage the firm has over some of its rivals is the broad links of its parent company. “Cornerstone Capital is a complementary service alongside Cornerstone Commercial Finance and within the wider Cornerstone Finance Group,” he explains.

“The Cornerstone Network now has 100 advisers, which means we have an army of field sales representatives in the regulated space across England, as well as some in Scotland, and they can offer their clients access to [Cornerstone Capital’s] non-regulated bridging loan product,” he elaborates, adding that this is a USP for the firm’s network.

As Cornerstone Capital’s clients are excluded from marketing or contact from other parts of the wider Cornerstone group, this means the existence of the network “is generally not a barrier” for other brokers considering its bridging products. The offering, which can be extended to 75% LTV, is also available through some third-party intermediaries,

helping to ensure the product is more widely available.

Haydn points out that the finance provider is also seeking to develop relationships with accountants and estate agents, which could further widen its reach. It already has connections with accountancy firms and solicitors in and around Cardiff, including Kilsby Williams, Haines Watts, and Sivapalan & Co, with the aim of establishing more partnerships “across a much wider geographical area”.

Broad target

The intended clients of the product include sole traders, partnerships and limited companies, and the loans— which can range between £25,000 and £500,000—are focused on residential and commercial property. The firm does not offer loans for land that has no building on it.

Haydn estimates that roughly 60% of its bridging loans are used to remortgage properties, freeing up cash for clients to either purchase more or improve their existing ones. Deals have included loans to fund auction purchases and equity release from commercial properties to fund residential ones. Uncertainty and rising rates in the BTL and commercial markets since November last year have led to an increase in bridging as a short-term solution while the market settles, he believes. “Many entrepreneurs are also releasing equity to take advantage of off-market sales at a discount, and bridging offers a great solution for them,” he adds.

The lender’s rates start from 0.55% per month, with an arrangement fee of up to 2%, and a broker fee of up to 2% (but usually closer to 1%).

Cornerstone Capital uses Method Valuation, a panel management service that Haydn says has helped ensure clients receive quick decisions. “We very much look at the individual and the asset liabilities, along with the exit,” he explains.

The terms of the firm’s bridging loans range from three to 12 months, with extensions available on a case-by-case basis. “We don’t charge over-exorbitant fees for short extensions,” Haydn comments. “I think we’ve done two where it was extended by a month due to a delay in the sale or delayed refinance elsewhere, and we charged a month’s interest.” An extension of three months would incur interest plus a fee.

No funding limit

Looking ahead, Cornerstone Capital is aiming to develop organic growth in England by building its reputation and client base through its existing customers and its parent company’s adviser network.

The firm has a five-year plan to become more of a standalone brand, which Haydn says means less reliance on Cornerstone Financial Group’s wider business for support and introductions.

While the lender has no specific lending targets for the coming year, Haydn says the company’s funder is interested in growing the company and has “substantial resources to do that”.

The support from its funder has enabled Cornerstone Capital to remain competitive, with Haydn stating that the firm only raised the interest rate it charges by a marginal 10 basis points in November last year, despite several interest rate rises by the Bank of England since.

With the pace of property price growth dampening alongside increasingly prevalent affordability issues, there could be significant opportunities for investors that can secure the capital—and, crucially, for those that can supply this.

When you think of money laundering in the property market, the first thing that naturally comes to mind is properties purchased with cash. It is without question one of the sector’s biggest money laundering threats, and all too easy without the necessary checks in place. Almost £7bn of suspect funds from around the world have been invested in UK property since 2016, according to research published last year by Transparency International.

What is not so instantly apparent is the use of mortgaged property or loans as vehicles to launder money. But, as criminals explore ways to filter illicit funds under increasing spotlight, lending of all kinds presents a potential rat run.

Much like solicitors and estate agents, lenders are legally required to complete anti-money laundering (AML) checks. However, with cash purchases more prevalent and presenting much of the risk, there’s a possibility that finance providers could become complacent or slow to modernise their AML processes and responsibilities in line with growing risk. Perhaps the most obvious approach is for criminals to use dirty money as a mortgage deposit, although this should be weeded out at onboarding by both lenders and solicitors through robust Know Your Customer (KYC) checks. However, with an overreliance on flawed physical documents and manual checks within legal and financial services, this isn’t always guaranteed. Our most recent survey of regulated legal, finance, property and banking firms found that nearly half still use hard documents—such as passports, ID cards and utility bills—in some way to verify new business customers. Beyond deposits, criminals could also use laundered cash to overpay a mortgage or loan, or use a relative or close contact to act as a third party who could use their bank account or transact on a criminal’s behalf. That’s not forgetting commercial lending, such as securing a BTL mortgage and laundering cash through rental income.

Compliance shortcomings

Rather than give would-be criminals a helpful cheat sheet, my aim is to encourage all parties to be alive to the serious threat of money laundering. After all, those who lack suitable processes face far more than just a slap on the wrist. In addition to being named and shamed by the FCA for non-compliance, there are hefty fines and lengthy investigations that can debilitate organisations. Even as recently as the past year, we’ve seen examples of lenders and financial institutions facing regulatory action for non-compliance. Among these cases, the FCA has identified serious shortcomings and major breaches of regulations through lacking basic customer due diligence, money laundering checks or ongoing monitoring.

Firms have also been found to be under-resourced, which has led to staff not screening people appropriately, as well as working with customers who are politically exposed persons (PEPs). This is a clear reminder of just how necessary robust checks are—and also of the determination of regulators to tackle non-compliance.

Failure to check businesses

Recent judgments by the FCA have also highlighted flaws in identifying and monitoring business customers, leading the regulator to hand out multi-million-pound penalties to some of the largest banks in Europe.

As part of our survey at SmartSearch, more than one in four finance and banking firms admitted to similar compliance weaknesses. Some 26% said they either did not complete any verification checks on new business clients or did so just “some of the time”.

More worryingly, almost half (45%) disclosed they did not identify the ultimate beneficial owners (UBOs) of the new companies they dealt with. This loophole is a key mechanism

ARE YOU SLEEPWALKING INTO COMMITTING A MONEY

LAUNDERING OFFENCE?

Words by Jade Kirk enterprise business development manager at SmartSearch

An alarming and widespread lack of due diligence is putting specialist lenders and intermediaries at risk of regulatory action— and of being drawn into crime

exploited by criminals who create complex corporate structures to hide the real recipients of illicit funds.

This is hugely topical at the moment, with Transparency International’s report highlighting the glaring weaknesses of the government’s new Register of Overseas Entities. The study reveals that nearly 52,000 UK properties are still owned anonymously and held by 18,000 offshore companies. This includes firms reportedly owned by kleptocrats, oligarchs and individuals subject to sanctions. Given the climate and the very real threat posed to institutions, the lack of due diligence is alarming. Firms forgoing their requirements to identify not only customers, but also the ultimate beneficiaries of businesses are sleepwalking into dealing with PEPs, designated persons, and those facing sanctions.

Brokers: first line of defence

With brokers and advisers not held to the same requirements as lenders, solicitors and estate agents, it can be very easy for some firms to over-rely on others in the chain or just simply pass the buck. Nonetheless, brokers have a key

role as one of the first lines of defence in identifying and reporting any suspicious activity. Therefore, they still need the systems and controls to prevent financial crime. But, without the processes in place to do so, they could be seen as enablers and, ultimately, be drawn into illegal activity, as well as damage their reputation and relationships with lenders. To mitigate the risk, many firms choose to implement the same systems adopted by others within a chain.

Technology sharpens compliance

To meet the rising threat level posed by criminal activity and the sanction regime, many companies have decided to make compliance digital. This means taking advantage of tools such as electronic verification (EV) to authenticate a customer’s identity—a key component of KYC checks. Not only does it replace open-source checks, but it also removes the need to rely on the flawed and time-consuming methods of manual verification of paper documents. Such is its success and accuracy, EV is recommended by the Money Laundering and Terrorist Financing (Amendment)

(EU Exit) Regulations 2020 as a fundamental part of a compliance strategy. Using EV as part of a digital compliance platform such as SmartSearch means thousands of in - depth checks can be completed in seconds. The addition of ongoing monitoring, comprehensive UBO checks and robust sanction screening means firms are alerted to any potential red flags, with enhanced due diligence triggered automatically on any new or existing customer matches.

Since the banking crisis forced many mainstream lenders to be more restrictive, the specialist lending sector has done tremendous work to support borrowers with niche requirements and help businesses achieve their goals. One of its greatest strengths is the speed with which these lenders can provide funds.

It’s important, though, that this clear selling point of a specialist finance provider doesn’t also become its compliance downfall. Implementing the latest innovations allows firms to drive for greater efficiencies without losing accuracy, providing a clear competitive advantage and a frictionless compliance process.

‘IF YOU ARE PREDICTABLE, RELIABLE AND STEADFAST, THE CUSTOMER KNOWS WHERE THEY STAND’

Demand for bridging and development finance remains strong, says MSP Capital’s head of broker relations Arian Manouchehri, who describes how economic volatility can benefit the specialist lending market

Arian Manouchehri

While the UK property market is still seeing the aftermath of the multitude of overwhelming changes that occurred in 2022, including continuous Bank of England rate increases and the mini-Budget, experts are cautiously optimistic that the industry is on the road to recovery.

Arian says that—despite the macroeconomic challenges—the further retreat from the market by high-street lenders, plus several shockwaves in the BTL market, have presented good opportunities for specialist finance providers. These lenders are able to step in and assist with short-term financing needs, easing pressure on borrowers who have been let down until a long-term solution is found.

Loan book doubles

Looking back at MSP Capital’s performance in 2022, Arian confirms the business has seen an increase in the number of clients opting for bridging and development finance over the past 12 months. “We are seeing tremendous appetite for MSP Capital’s services. Our loan book value in 2020 was £200m but, by 2022, it had hit just shy of £400m,” he states.

The company has seen an influx of loan applications for both its bridging and development finance propositions, and there was even a slight uptick around the period of government transition in 2022. It received applications for loans of varying sizes, including some large-ticket facilities nearing £20m—the lender’s maximum loan size. Arian states that the bulk of MSP Capital’s business completed, however, is below the £5m mark and believes there is a notable number of high-quality opportunities in this segment. He also

divulges that a slight increase in the length of the loan term has been sought: “Our borrowers are sensible and understand that a term length with extra allowance isn’t the worst idea should sales slow in light of the recent macroeconomic changes.”

Financing for the next project

MSP Capital has seen a particular increase in demand for its development exit loans throughout both 2022 and in Q1 2023. “The legacy of Covid-19, coupled with the recent economic challenges, resulted in many development deals being delayed—as a result, there were a number of instances where the borrower was tied into a development project but wanted to capture opportunities elsewhere,” explains Arian. “Our development exit bridging loan provides that liquidity to go and acquire the next project and allows our client to continue their growth as a business.”

The same level of success was witnessed across the lender’s development finance proposition as well, which offers facilities of up to £20m and a maximum 70% LTGDV. “From the loan applications we continue to receive, it is clear that demand for development finance continues,” says Arian. “In the past 12 months, we have supported a range of residential development deals and we are happy to lend against ground-up, conversion, light refurb and part-complete projects.”

Arian is confident demand for development finance remains robust, despite the wider market difficulties, such as supply chain pressures and materials and labour costs. “Based on our own experiences in recent months, I am cautiously optimistic; loan redemptions, driven by sales to the end buyer, remain very much present. The most important

Our borrowers understand that a term length with extra allowance isn’t the worst idea should sales slow in light of recent macroeconomic changes

thing when assessing an opportunity is to make sure there is a sensible plan to achieve practical completion. Ultimately, that’s how we are redeemed and how the borrower makes their return.”

Going into detail

According to Arian, the lender’s success to date is down to its reputation for flexible lending and high-quality service. “We are building on what was already a sustained, steady period of growth for us, as more brokers recognise our unique approach. At our core, we are a relationship-led business, always happy to discuss a funding need in detail and how best to address it,” he shares. “This is what drives so much repeat and referral business; when brokers have a positive experience and feel looked after, they are more likely to use us again and recommend us to others, and we can expect this to be a continuing factor for the foreseeable future. We aim to look after people as best we can, get rid of red tape that adds no value, and focus on the salient and commercial points of a deal.”

The finance provider’s knowledge in handling various deal structures, as well as its consistency and speed of delivery are elements that Arian thinks make MSP Capital stand out—and are qualities that he believes are more important during volatile times. “We have surveyors, valuers, accountants, bankers, property developers and many other experts within the team who bring an enormous collective knowledge. This allows us to provide rapid and reliable decision making on seemingly complex matters,” he comments.

“In the property industry, the ability to move with speed and decisiveness has always been a strength. In volatile market conditions, urgent funding requirements will often arise, so being positioned to service these requirements at short notice will present opportunities for lenders with experience and confidence. If you are predictable, reliable and steadfast, the customer knows where they stand, and opportunities will be realised as a result.”

Local knowledge, consistent valuations

While Arian is confident that the demand for specialist finance will continue in 2023, he identifies one key issue likely to affect brokers and borrowers: consistency in valuations. He emphasises the importance of working with valuers who have the relevant local knowledge and understand the market to head off potential problems.

“Any lack of consistency in decision making around risk assessment is more likely to be heightened during a period of economic uncertainty—that’s something we’ve seen before and will see again.”

Nevertheless, Arian doesn’t expect to see any major impact to valuations.

“So far, we are seeing sale volumes remaining resilient and capital values largely being sustained. Therefore, the empirical evidence at this stage doesn’t point to materially declining valuations,” he suggests. “The macroeconomic factors and potential impact on house prices should be accounted for in sensible underwriting decisions and ensuring loans offered are fit for purpose.”

Shift to specialists

As we talk about what trends we are likely to see in the market this year, Arian says development exit deals are expected to remain popular. “Our data shows sales to end consumers remain resilient, particularly in the geographical markets we prefer (South West, South East, Greater London and the Home Counties). That being said, development exit deals will also be an option if, more widely, the market does see a slowdown in sales due to the interest rates changes we are all experiencing.”

In the development finance space, Arian predicts the focus on sustainability and energy efficiency will continue—driven by proposed regulation and the cost of living crisis changing buyers’ priorities when purchasing homes. “This is a pattern that is likely to become more entrenched as these types of buyer behaviours become the status quo. Modern methods of construction are a subset of a larger shift towards more efficient homebuilding and greater conscientiousness as to the carbon impact of the construction process itself, rather than their EPC rating alone once completed. I would draw parallels to the rise in the popularity of electric vehicles as a replacement to the conventional combustion engine—progression is both desirable and inevitable.”

Above all, Arian is confident the demand for specialist finance is here to stay: “We have seen a shift away from high-street lenders towards specialist ones over a number of years; this is a long-term pattern that will certainly continue into the future. There is no doubt 2023 will be a year that presents both challenges and opportunities, and I am excited to experience our course.”

In volatile market conditions, urgent funding requirements will often arise, so being positioned to service these requirements at short notice will present opportunities for lenders with experience and confidence

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M&A among specialist finance companies have long been on the horizon, and it looks like the wheels are already turning. But is activity expected to be marginal or widespread?

Words by ROB

LANGSTON

ince the global financial crisis, the specialist lending space has developed into a bustling ecosystem, with a wide range of lenders and products serving a rapidly growing market. However, as the economic backdrop has deteriorated and interest rates have risen, lenders’ margins have started to come under pressure.

At the same time, finance providers are under considerable pressure to invest more in technology to maintain high service levels and reach new customers. A more challenging operating environment is likely to mean fewer entrants to the lending space in the coming years, says Matt Watson, chief executive and founder of Guernsey-based specialist finance provider Tenn Capital. “The wave of new lenders coming into the market will dramatically decrease in the next 12 to 18 months and, actually, the consolidation period has probably begun,” he says, noting that the benign, low-rate environment that led to many lenders entering the market no longer exists and profits are now under greater pressure. “Eventually, you get to a point where you have an open and honest conversation about consolidation.”

This is expected to lead to “larger, more scalable businesses”, says Matt, which will “crucially, offer a better service for clients” as the remaining finance providers would be those able to invest more in their offering and compete on service.

Growing borrower demand

Although economic conditions have changed, there is still considerable demand for loans, with the specialist mortgage market forecast to grow to £16bn by 2030, according to specialist lender Together.

Nicholas Mendes, mortgage technical manager at brokerage John Charcol, says

demand for specialist lending products has grown considerably in recent years, fuelling entrants into the industry. “The pandemic was a pivotal moment for specialist financiers as high-street lenders’ appetites began to be reined in; new finance providers took the opportunity to make not only a name for themselves, but also a credible long-term solution. In a postpandemic world, clients have more options and opportunities than previously. This can be seen across a range of product lines, and I expect we will continue to see innovative hybrid products moving forward.”

The addition of lenders in the specialist finance space has helped to create a highly competitive marketplace for borrowers, but the influx has made it difficult for various finance providers to gain scale and grow profits. As such, some lenders remain on the smaller side, putting them under pressure as market conditions change and costs continue to chip away at earnings.

All this has made M&A a more attractive option for owners of smaller lenders who may be looking to exit the market, and a sensible route for those looking to add scale to their business.

“What we have had over the past 10 years is quite a benign environment where lots of people could set up shop and start lending,” says Duncan Chandler, head of financial services M&A at consultancy BDO LLP. “Those days are probably over. What you now find is many of these businesses are not sustainable and haven’t reached safety in getting to the right scale—especially with bridging where the loan books have such short maturity and the velocity of lending is high.”

Chris Gardner, joint CEO at development lender Atelier, claims that while the number of lenders—both banks and non-banks—has risen over the past 12 years, “80% of the business is done by 20% of the lenders”.

“If you are a specialist finance provider entering the sector today, market

share and acquisition of market share are tough challenges to overcome,” he comments. “As with most lending, it is about critical mass, and you must get to a certain scale before the economics work. That has been a challenge for new market entrants for the past five or six years. It’s still a compelling market, an asset class that people understand and, because we have had a very long period of rising property prices, people have found that risk quite acceptable.”

More secure funding

One of the biggest advantages of consolidation will be access to secure funding lines. More recently, the banking sector has come under greater pressure following the collapse of Silicon Valley Bank and the takeover of Credit Suisse, raising the spectre of another potential financial crisis. In such an environment, lenders with multiple and dependable lines of credit are likely to be better positioned than those without. Bigger finance providers with more secure funding lines will be able to ride out any particular difficulties in the market, while those with big client bases but fewer sources of credit may find themselves acquisition targets. The greater number of non-banks active in the specialist lending space without access to a deposit base has also given rise to concerns about the strength of the sector. But Stephen Hogg, chief operating officer at Enra Specialist Finance, says while banks might be perceived to be in a better position, Silicon Valley Bank has shown the banking sector can be just as exposed to risk as non-banks. “Over the past several years, the main driver of consolidation among specialist lenders has been nonbanks becoming banks and then needing to consolidate further as they require substantial scale to justify their higher cost bases,” he says. “In large part, this movement has been driven by a judgement call that funding is more stable and costs

are cheaper for banks than for non-banks.”

“Some might argue that non-banks are less resilient to shocks than banks, and therefore there’s a bit more risk in the market as interest rate volatility returns,” Stephen adds. “But, as we’ve seen recently in the US, volatility can cripple large banks just as easily as smaller businesses. What matters much more than size or a banking licence is simply whether businesses are well run and risk is well managed.”

Nicholas says the industry’s complex funding lines have always been its ‘Achilles heel’ and often come under pressure during times of crisis. “As we witnessed post miniBudget, some lenders had to withdraw their products with little to no notice due to lending lines being pulled, or had to add new expensive lines of credit, making certain products an unrealistic option as they became too expensive,” he shares.

There are currently “storm clouds” on the horizon over funding as problems in the banking system emerge, claims Duncan, but he is of the opinion that bigger lenders with more established lines of credit should be fine. “Everyone is worried about funding—this is a very existential thing because without it, you’re out of business,” he explains. “If you are bigger, you can get better funding terms, or you can jump onto someone else’s funding platform if you merge. If your funding dries up because you’re small, you will ultimately [need to] sell out to someone else who has funding.”

Dynamics affect deals

The strong growth in specialist lenders in recent years means consolidation could happen in several areas, such as bridging, BTL or development finance. However, they are all nuanced markets with different dynamics at play.

A surge in the number of bridging finance companies in the UK due to low barriers to entry—such as wide access to liquidity and a broker-led market— has made it a natural area for mergers.

“Eventually, you get to a point where you have an open and honest conversation about consolidation”

But consolidation has focused mainly on certain players, says Nick Parkhouse, a partner in the financial services corporate finance team at consultancy EY. “Where businesses have been sold, it has mainly been as a result of them having scale or multi-product strategies. The number of single-product, small- to medium-sized bridging lenders that have been sold in the UK is very low,” he explains. “One option that could be considered in the absence of selling is to merge with another finance provider and create a large-scale lender. By doing so, both parties would have to accept that, while this may drive cost savings, you are likely to have an overlap in broker relationships, thus potentially reducing the benefit of such a transaction.”

Nick adds: “BTL has had a difficult six to nine months since the mini-Budget with a combination of higher and more volatile swap rates, along with a securitisation market, which was broadly closed in Q4. It feels like it is [starting to] come back, with lower rates and capital markets reopening. However, margins for lenders are lower than they were.”

Valuations in the sector should also support consolidation; Duncan believes the relatively crowded market could drive players with stronger funding to get acquisitive, especially if businesses end up with reduced price tags. With the current challenges facing the banking system, some attractive opportunities have started to emerge as investors consider banks and non-banks (each in their own way) as higher-risk assets in the event of a financial “wobble”, or less attractive from a return perspective, should new regulations—like the PRA’s proposed Basel 3.1 framework for credit risk— increase costs and squeeze profits.

“Across the piece, the banking sector and quoted specialist lenders are still lowly valued. And, with what has happened in the past few months with all the talk of a recession, the mini-

Budget, higher interest rates, and now with Silicon Valley Bank, those valuations aren’t going north any time soon.”

One constraint that may stifle the amount of consolidation in the specialist lending sector is the M&A process itself, says Chris, particularly in more short-term areas of the market, such as bridging. “If you acquire a short-term lender whose loans are repaid relatively quickly, some of the loan books will have dwindled by the time you finish the due diligence process,” he says. “It’s not like buying a mortgage lender, where they might have £250m in 20-year mortgages that you can acquire with 19 years of revenue to go. Also, lending and risk appetite are very different across the sector. Potential acquirers may decide that, upon completion of their due diligence, the business they were interested in no longer meets their risk appetite.”

While fewer finance providers might ordinarily mean less choice for brokers and their clients, Duncan believes that if some of the heat were to come out of the market and you had fewer, better, more reliable lenders, some aspects of consolidation might be welcome. “An oversaturated market can often do with a bit of a shake-up.”

Chris says the lenders that remain in the sector will likely be the ones that can afford to invest in their business and offerings. “I do see it as a winners-and-losers game,” he states. “Businesses that are well funded with good products and capital to invest in their platform will continue to take market share. Others probably won’t reach the scale and will gradually fall away.”

Good or bad?

Opinions remain split over whether activity will climb in the coming months. While some believe the crowded lender market is due for consolidation, others think it might not make sense financially. “If we think about the next few years, we are not going to see a great deal of

“Businesses that are well funded with good products and capital to invest in their platform will continue to take market share. Others probably won’t reach the scale and will gradually fall away”

consolidation,” predicts Chris. “We may see some of the better lenders acquired by other lending organisations looking to bolt on a development finance or bridging arm. But we’re not going to see wholesale consolidation between lenders. Why? Most lenders are relatively small compared to larger lenders, and a merger does not make economic sense. They’re all chasing the same customers, and I don’t see any incentive or business case for inter-sector consolidation.”

M&A activity typically falls into one of two types: constructive or defensive, says Stephen. Constructive consolidation is where a buyer sees market opportunity best accessed through M&A, while defensive M&A is a corporate finance strategy that consists of companies acquiring other firms and assets as a “defense” against market downturns or possible takeovers. “In the short term, interest rate volatility will put pressure on any business that hasn’t managed interest rate risk effectively and, in extremis, this could drive some involuntary consolidation,” he says. “So defensive M&A is more likely over the remainder of 2023,” he forecasts. “I think the one constant is that dynamism and change are good things for our industry, sorting the stronger businesses from the weaker ones and driving positive evolution within the specialist lending sector.”

Matt envisages that over the next 10 years, the market will likely see a reasonably small, but meaningful, number of larger players. “This will solve a lot of the problems that exist today.”

A research centre developing sustainable practice in the built environment has been set up by UCL, with support from Puma Property Finance. The lender’s managing director Paul Frost and the university’s associate professor Armando Castro discuss why combining academic and industry expertise will bring viable benefits to the property market

Words by andreea dulgheru

With the net zero carbon target looming over the UK, there’s no denying that sustainability is a hot topic in UK construction. For specialist lender Puma Property Finance, this is a core focus. Conscious that it could not achieve this on its own, the firm began looking for a partner. “We were very keen to find organisations that had the credibility, independence and academic rigour to really investigate this topic properly,” explains Paul. “It would be unrealistic for us to do it all ourselves so, rather than acting unilaterally as a lender and trying to move the market in some way, we chose to partner with an organisation to amplify our impact and bring greater results.”

As fate would have it, UCL was already laying the foundations for this type of work. Armando tells me he had proposed in 2021 the creation of a multidisciplinary centre to promote legal, financial, and policybased research to drive sustainability in the UK construction sector. “The world’s

already suffering some consequences of the climate crisis, and there are social and governance issues that need to be better researched and debated in society,” he says. “However, we think that we need a more fact- and research-based conversation, rather than the purely emotional and political debate that [is happening] right now, particularly in the construction industry and built environment.”

Just like Puma, UCL was also looking for a partner to embark on this journey with—an active and well-known player in the UK development sector, with a desire to improve its sustainability practices and drive change in the industry. A serendipitous meeting between Paul and Armando confirmed their ideals were the same, so the two partnered at the beginning of 2023 to officially launch the Centre of Sustainable Governance and Law in the Built Environment. Its aims are to address the challenge of building more with less emissions as the demand for better-quality housing increases.

From Puma’s perspective, bringing

academia into the mix offers an independent and impartial view of the industry’s issues, ensuring that the research and subsequent proposed solutions are objective and credible. For UCL, the partnership gives the team access to Puma’s data, meaning that research is grounded in reality and approached from a practical rather than purely theoretical point of view. “It’s easy as an academic to stay very isolated and just focus on your own research, so starting very early on with an industry partner helps to keep us more down to earth and grounded,” explains Armando.

Multidisciplinary, multiple studies

The new centre will see the 10-member team—with expertise in areas such as economics, finance, civil engineering, geography and psychology— develop applied research to improve understanding of sustainable practices in the built environment and drive forward solutions. Ultimate objectives include developing innovative financing

models for construction projects, improving knowledge transfer, and decarbonising buildings.

According to Armando, team members are working on individual research projects on a variety of topics at the same time. “To give a few examples, one of the members is conducting research on how climate-related overheating is affecting older communities in the UK. Another colleague is studying how to accelerate the decarbonisation of building stock by collecting better quality information and then later on sharing that for the delivery and refurbishment of buildings,” he elaborates. “A third project is focusing on the metrics and KPIs that should be included in sustainable lending practices, which can then help foster and develop better practices for supply chains and borrowers. There is a wide scope of research, but our idea is to develop tools and frameworks that later can be adopted by the industry and government.”

Findings into practice

The first semester will be focused solely on collecting and analysing data, after which the centre will produce open-access reports. In addition, it will organise events and seminars for various sector stakeholders—including industry academics and policymakers—to go over the research findings and discuss how they can be implemented across the industry.

As part of the collaboration, Paul represents Puma on the centre’s advisory board. In addition, the lender will play an

SUSTAINABLE BUILDINGS ARE WORTH MORE, THEY HAVE GREATER LONGEVITY AND LOWER RUNNING COSTS, PLUS PEOPLE ARE PREPARED TO PAY MORE FOR THEM.

THAT’S STARTING TO COME INTO INVESTMENT DECISIONS”

active part in the research carried out by sharing data from its existing and future loans to offer practical, real-life insight, something Armando believes is extremely valuable. Paul also notes that Puma is open to implementing frameworks or initiatives that come out of the research.

“Different investors and lenders have taken some initiatives around so-called green loans and green finance products. By partnering with UCL for this centre, we want to do two things: have an assessment of how successful and impactful these initiatives are, as well as get a sense of what hasn’t been thought of and done in this area, so we can innovate.”

Both Armando and Paul emphasise that the centre’s research is not targeted at housebuilders and property developers directly, but aimed at decision makers within the UK construction sector, including finance providers.

“We will not be developing green cement or materials research, but we are keen to engage with any organisation through the optics of governance and management and the financing aspects,” explains Armando. “By being able to convince the finance side through research that these are key and important issues, we can have a greater social impact.”

Economic imperative

There is no denying that the construction sector is paying more attention to sustainability, with the national—and global—ambition of reaching net zero carbon by 2050 being the main driver of this. However, while Paul believes targets and government policies helped sharpen this focus, he doesn’t think they have been the principal driving factors. “I think this has been largely led by the private sector and its shareholders, as it’s starting to become increasingly evident that there is an economic imperative for this, on top of the moral one,” he explains. “When you think about real estate, sustainable buildings are worth more, they have greater longevity and lower running costs, plus people are prepared to pay more for them. So, if you’re a real estate developer, operator or investor, why would you not be pushing this agenda? I think there’s now a realisation of that, and that’s starting to come into investment decisions that I don’t think was necessarily the case a year or two ago.”

Standards versus greenwash

While there has been a rising number of developers taking on sustainable schemes—a trend that both Paul and

Armando have seen over the past 18 months—there are still several issues that could impact progress. One of these is the lack of consensus when it comes to measuring the sustainability of a project, as there are several systems to assess, rate and certify them. According to Paul and Armando, this can open the door to greenwashing if developers and housebuilders choose to prioritise and promote a particular sustainable factor of a project while side-lining the rest.

“There are lots of measures out there, but the question is how reliable they are,” adds Armando. “It’s important for the industry to have a defined set of agreed metrics because, if we don’t measure things appropriately, the risk of greenwashing is really high. For example, lots of research is going on in environmental topics, but how does that integrate into a broader ESG framework? That’s something we are still studying, and we aim to share some insights on this once we have them.”

The biggest problem, in Paul’s opinion, is developers’ lack of long-term vision, compounded by recent economic volatility and high labour and material costs. “If you’re a developer or a construction firm, you must make the numbers add up and, sometimes, sustainable initiatives cost more. While they do deliver more valuable buildings and the return on investment is much greater, not everyone has the luxury to have that longer-term perspective,” he states.

“I do hope that the cost pressures squeezing the construction sector don’t reverse some of the progress that’s been made or halt it. I hope people can maintain that long-term perspective and see the value of sustainable buildings.” While the progress of the green agenda is threatened by macroeconomic pressures, both experts are confident that the spotlight on sustainability will continue in the construction sector, and are hopeful that the insights delivered by the centre will accelerate this.

In addition, Paul emphasises the importance of alternative finance providers in pushing the green agenda: “The alternative lenders have been taking a larger market share in development finance for a long time, and I think that will continue. Sustainability is increasingly becoming a mainstream part of the conversation in development lending so, by extension, it is inevitable there will be a large role to play for alternative funders.”

“WE NEED A MORE FACT- AND RESEARCH-BASED CONVERSATION, RATHER THAN THE PURELY EMOTIONAL AND POLITICAL DEBATE THAT WE SEE RIGHT NOW, PARTICULARLY IN THE CONSTRUCTION INDUSTRY AND BUILT ENVIRONMENT”

than just the one cherry on top

More products. More opportunities. More “Well, that was easy” moments.

Now that we offer buy-to-let mortgages as well as bridging loans, we will continue to do the extra special but with more solutions and for more of your clients.

For hands-on help with your specialist lending enquiries, get in touch with the team that makes good things happen.

mt-finance.com

never stopped lending, even during the

As Market Financial Solutions gears up to build a £1.5bn loan book by the end of this year, its CEO Paresh Raja describes to Bridging & Commercial how the business has grown through crises and why optimism leads to success

Words by andreea dulgheru

‘We’ve

most difficult economic conditions’

It was a long, fortuitous and successful path that saw Paresh launch specialist finance lender Market Financial Solutions (MFS) almost 17 years ago. After realising that he was destined for a role in finance—rather than his dream of becoming a pilot—Paresh began working for one of the UK’s prime management consultancy firms in the 1990s. Here, he gained significant experience in restructuring businesses, after which he moved into the broking industry in 1999.

Later on, Paresh set up an independent investment group, where he managed a cumulative loan book of over £600m. It was during his time there that he spotted a gap in the market for facilitating finance—and one that he was keen to fill. “At the time, investors were struggling to access

was a tough time for him and the company: “It was difficult to progress in a market that was in freefall, but we pushed through it and emerged stronger as the world recovered.”

MFS was able to navigate the difficult market and slowly, but steadily, continued to bolster its business and team, securing several funding lines from investors along the way. It also expanded into the Asian market in 2018 after opening its first office in Singapore, following a growing borrower appetite in the area for alternative funding and to take advantage of the region’s rapid rise as a global hub for finance.

“It was incredible to launch a business that, with everything going against it, succeeded,” states Paresh. “What’s more, seeing the signs of true acceptance from property investors for the specialist industry motivated me to push past any challenges that came my way.”

funding quickly for their long-term investment plans. I saw there was a clear need for facilitating more complex financial transactions, so I wanted to use the knowledge I had built up to offer specialised products that could support borrowers who were running out of time to secure their properties.” And so, in 2006, MFS was born.

Surviving the crash

Only two years later, the great financial crisis hit the UK markets, causing havoc in the finance sector. Despite having been operating for a fairly short time, MFS’s specialist finance products made it succeed in a tumultuous market, as investors started looking for more niche options to fund their investments amid a lack of supply from high-street banks.

“The 2008 crash made it difficult to attain funding through the mainstream [providers] and, as the world became more complicated, it became clear more bespoke solutions would be needed. I wanted to support property investors with flexible, adaptive products that could be issued quickly, and be tailored to their circumstances,” explains Paresh.

Despite the lender being in a relatively fortunate position thanks to its focus, Paresh shares how it

In contact during Covid

In 2020, MFS was met with yet another global crisis: the Covid-19 pandemic. Just like most firms across the world, the specialist lender was forced to transition from its traditional office-based and clientfacing approach towards remote working during the UK lockdowns. Paresh reminisces about this time—yet another troublesome career moment for him. The pandemic accelerated MFS’s move to a new customer relationship management system, and saw the team adapt to the new ‘Zoom culture’ forced upon them.

“Throughout those difficult months, we had regular internal video calls to keep on top of everyone’s workflows, and we focused on supporting our team’s mental wellbeing where we could,” he recalls. “Much of MFS’s operations are underpinned by building relationships with brokers and other stakeholders, so it proved challenging to nurture these relationships during the lockdown years. However, while these periods were difficult, they reminded us of the importance of flexibility and adaptability—it’s vital to have strong foundations in place so you’re able to respond to the market as needed.”

“I’m a firm believer that optimists are more likely to succeed—if you truly believe better times lie ahead, they will”

The business went on to provide almost £100m of bridging loans throughout all the lockdowns, and launched a £60m dedicated Covid-19 recovery fund in August 2020 to ensure loans could be issued quickly to those at risk of a transaction deteriorating.

Keep on growing

Despite these challenging years being followed by an extremely volatile market due to the consecutive Bank of England rate rises, political instability and a disastrous miniBudget, MFS never slowed down

its activity. On the contrary—since 2021, the specialist finance provider has secured £1.6bn of funding from its institutional investors, and entered the BTL market at the start of 2022.

Paresh looks back at the firm’s achievements over the years with fondness: “I’m amazed that we’ve grown from a team of just three to over 100 staff—and we’re still expanding. I’m also proud that we opened an office in Asia, and that our BTL mortgage launch has gone from strength to strength,” he says. “This is the result of all the hard work my teams put in—their dedication

has allowed us to secure hundreds of millions of pounds in institutional funding lines, and issue ever-larger loans to the market, the biggest of which being £18.4m delivered in 2023.”

Core values

When asked what the key to MFS’s success and longevity is, Paresh says it boils down to one thing: the company’s commitment to flexibility. “We’ve built up a culture of finding solutions to any challenge we come up against. We look for reasons to lend, as opposed to finding excuses not to, and we will never dismiss an enquiry without giving it a fair hearing,” he explains.

“Regardless of whatever short-term negative sentiment may be in the press, we focus on the long-term options. We’re optimists, and this optimism is underwritten by extreme organisation, in-depth knowledge of the market, and a commitment to our customers.”

The confidence in the market that Paresh is talking about derives straight from his personality and ethos, which he says has trickled down into the core values of the entire company.

“There is one quote from Mahatma Gandhi that has always stayed with me and guided my work ethic: ‘A man is but a product of his thoughts; what he thinks he becomes.’ I’m a firm believer that optimists are more likely to succeed—if you truly

as some less reputable entrants have endangered the sector’s reputation when things have gone wrong. “When participants withdraw from the market or go out of business as a result of underestimating the challenges, it risks giving the impression of flippancy and, subsequently, investors may end up losing confidence in our wares,” warns Paresh. This risk is exactly why he values certainty, consistency and commitment—and why he makes sure his business’s operations are based on these values. “When we say yes, we mean it, and we never pull out of a deal once terms are agreed. We’ve never stopped lending, even during the most difficult economic conditions. Also, we’re constantly expanding our funding lines to ensure our deals stand on the most solid foundations possible.”

Despite the effects of macroeconomic difficulties and less reputable players on the market, Paresh is confident in MFS’s bright future. He is setting out big ambitions for the company; in addition to growing its loan book to £1.5bn and issuing £500m of BTL mortgages by the end of 2023, the lender is looking to further develop its proposition to meet market demand. In addition, the finance provider aims to enhance its digital usability through an app it is creating to improve the user experience and speed up

believe better times lie ahead, they will. That is, of course, underpinned with knowledge, research and a clear vision of what you want to achieve.”

Guarding a reputation

Having been part of it for many years, Paresh has seen the specialist finance industry evolve. He notes the numerous new lenders that have entered the market and a number of high-street names expanding into it have helped legitimise the offering to a certain extent and brought bridging to the front of investors’ minds.

While this bodes well for the overall market, this is a double-edged sword,

the lending process. The company also plans to run its own in-person events this year to educate those in the market and network with potential partners to promote its services. These targets are set to help MFS reach its ultimate goal: becoming a leader in the sector and bringing specialist finance into the spotlight. “This market is still considered by many to be an alternative sub-sector of the lending landscape. I want MFS to be at the forefront of the industry and become a driving force for bringing bridging truly into the mainstream.”

“This market is still considered by many to be an alternative sub-sector of the lending landscape. I want MFS to be at the forefront of the industry and become a driving force for bringing bridging truly into the mainstream”

The 2023 UK Bridging Market Survey

Bridging & Commercial has collaborated with EY to exclusively reveal its sixth annual UK Bridging Finance Market Survey, providing the latest market trends and challenges the industry faces. With the country grappling with the cost of living crisis and the rising interest rate environment, this report aims to provide the financial services industry with a deeper insight into the current bridging landscape and where it is heading

Words by BETH FISHER

Illustration by VALF

Who took part?

The survey had 43 participants— 39 lenders and four brokers The majority (49%) are based in London , while 28% are in the South , 14% in the North , 5% in the Midlands , 2% in Scotland and 2% in Guernsey

Most of the businesses surveyed (28%) currently employ between one and 10 people , with 21% boasting a team of over 50 staff members.

What the bridging market looked like in 2022

The number of participating bridging lenders with loan books of £100-£250m (as a percentage of total participants) has almost doubled compared to last year’s survey

ESTIMATED SIZE OF UK BRIDGING MARKET

of bridging lenders are lending over

£100m per year

The majority (88%) witnessed an uptick in average monthly bridging interest rates

“Supportive funding markets and significant sector growth have meant originators have been able to build large loan books at pace. We have seen a greater gap develop between the larger originators and the rest of the market as a result. We expect this growth to continue through 2023, despite macroeconomic headwinds”

AVERAGE LOAN TERM

AVERAGE DAYS TO COMPLETE

PROPORTION OF REGULATED LOANS

Nick Parkhouse, partner, FS corporate finance leader at EY

“The past 12 months have undoubtedly been difficult for the UK economy and 2023 is also likely to come with challenges. Currently, we see delinquency levels stabilising, but it’s difficult to say at this stage exactly how this will impact foreclosure numbers moving forward’’

Nick Parkhouse, partner, FS corporate finance leader at EY

Other significant highlights from the past 12 months

72% reported either no significant change or a decrease in competition 14% saw the average credit quality of loans decrease A protracted legal process and borrower and valuer response times are the top three factors contributing to delays 19% think problems with getting information and a lack of knowledge from brokers contributed most to prolonged timescales One-third of the market (33%) saw a rise in the foreclosing of properties, compared to just 4% the year before

highlighted independent brokers as their most important primary channel for bridging loan originations, while the popularity of master brokers dropped from 27% to 20% year-on-year

Refurbishment, business purposes and mortgage delays are the top three most popular uses for a bridging loan Independent brokers, master brokers, and direct to customer are the top three primary channels for bridging loan originations Speed of execution is still considered the most important capability to a customer or broker when choosing a bridging lender (62%), while repayment flexibility is the least (5%) Reputation of the lender (38%) overtook relationship management (33%), but they were both in the top three most important factors Only 16% picked low pricing as the most important important—the same as last year Strong relationships with brokers was the number one capability for businesses to remain successful in the bridging market (68%), followed by strong origination capabilities (65%) and the ability to secure low-cost funding (60%)

How the market is currently funded

of businesses expect interest rates to climb further

of businesses are considering investment in technology

currently use or intend to use electronic signatures for legal documents

“M&A activity in both the bridging and wider property finance space has been impacted by macro events for both sellers’ views on timing and purchasers’ views on valuation. However, we still expect a number of transactions to complete this year focused on the larger and more institutionalised platforms, where there is less purchaser risk in relation to credit performance and growth projections”

Nick Parkhouse, partner, FS corporate finance leader at EY

are considering M&A activity and 19% are thinking about selling their business

plan to raise equity capital, 26% are looking to securitise, and 72% aim to raise or refinance debt capital

of companies are deliberating regulated lending of firms are looking to improve DE&I

of lenders intend to introduce variable rates

of businesses are thinking about product diversification, 44% are looking to expand regionally, and 28% are interested in moving into longer-term lending

of businesses disagree or strongly disagree that biometrics will significantly improve the efficiency of the origination and underwriting process

of firms do not intend to use AVM technology

of firms reported that demand for hybrid/remote working from employees and candidates was one of their top three hurdles

“Businesses that don’t have a defined strategy around areas such as ESG risk losing out to competitors that do, especially when it comes to funding and M&A. We therefore expect the number of companies stress testing their portfolios on environmental impact to rise over the coming 12 months”

Nick Parkhouse, partner, FS corporate finance leader at EY

ESG

58% of businesses plan to implement an ESG strategy over the next 12 months, with more than one-quarter (29%) aiming to launch an ESG-related bridging product linked to broad-based ESG measures beyond EPCs 28% of companies intend to introduce an ESGrelated bridging offering linked to EPCs 20% of firms plan to provide carbon offsets for their own direct corporate impact 12% of companies plan to stress test their portfolios based on their environmental impact Just over one-third (35%) plan to take part in lobbying activities to influence governments and policymaking for the property market/ finance industry in 2023 Roughly half (54%) plan to invest to enhance their AML systems

are eyeing green/sustainable finance

WHAT GREEN FINANCE TOOLS DO YOU PLAN TO IMPLEMENT?

Impact of macro-economic outlook

51% believe the 2023 macro-outlook will impact the bridging finance market moderately or largely in a positive way 70% expect borrower default rates to grow in 2023 65% predict a rise in forbearance requests and more than half (58%) expect to see foreclosures increase 86% anticipate average credit quality of loans to either have no significant change or decrease further over the next year 86% think loan extensions will be on the rise this year 30% believe the cost of origination will slightly increase

Others Environment stress testing of port lio

Carbon o sets for own direct corporate impact

ESG related bridging product - Linked to EPCs

ESG related bridging product - Linked to broad based ESG measures beyond EPCs

Leanne Ardron

In October last year, LendInvest promoted Leanne Ardron to head of bridging, after over a decade at the company. Having witnessed the firm’s evolution since its beginning as Montello, she believes transparency and technology have been key to its phenomenal growth, and is determined to continue this legacy

Words by andreea dulgheru

Following in the footsteps of her family, who owned a mortgage brokerage and packager, Leanne was driven to pursue a career in property finance. After working at Opal Home Loans for three years, she was given the chance by Christian Faes and Ian Thomas to join their newly founded specialist lender, Montello— which would later on become LendInvest. After more than 11 years of working through the ranks and proving her value, Leanne was promoted to head of bridging finance in October 2022. Now, she is determined to lead its bridging team to new heights and hit its ambitious targets for this year, while becoming a one-stopshop for all short- and long-term finance.

‘Brokers and lenders need to be more transparent with each other’

Leanne Ardron

You’ve been part of LendInvest pretty much from the beginning. How has the company evolved throughout the years?

When I first joined LendInvest 11 years ago, there were only five of us—three of whom were the owners at the time—and we were doing a much smaller amount of bridging loans with massively thick paper files, fax machines and lengthy processes using many Excel spreadsheets. Now, we’ve got over 260 people, a diverse range of capital and implemented a huge amount of technology. It’s been a really incredible journey, and we have even bigger plans for the coming years.

How do you feel about your personal career evolution over the years?

I feel quite proud and honoured that I was given the chance when I was younger. If you were to tell me 11 years ago that I’d do all the things I’ve completed so far,

and work in a company with 260 people, I’d have considered that a crazy thought. This just shows how hard work and dedication can get you to become a high achiever. It’s something I’m very proud of.

Since you joined the specialist finance market, how has this sector evolved?

I’d say the biggest change has been the use of technology. Before, brokers were frustrated by having to key everything into manual systems, having paperwork flying everywhere and filling in lengthy application forms. Now, if you look at most lenders, they all have broker portals which offer a faster, more streamlined and thus, more efficient lending process. Completing a loan can be done a lot quicker than before. Apart from that, lenders have become more flexible and pragmatic around their lending criteria. Of course, you still have to pay attention to the macroeconomic factors, but there’s a

lot more pragmatism and innovative thinking around lending, and a desire to make mortgages simpler in any way.

What has been your biggest achievement during your career?

Probably leading the creation of LendInvest’s bridging portal before and during Covid-19. When the first lockdown happened, we were already building the tech, but the pandemic accelerated this process. The big thing about this is that we built it all from scratch by ourselves—no third parties were involved. We spoke to brokers and customers to make sure we were building something that could tick all their boxes and make the process easier for both us and them. In the end, we created something that is speeding up the lending process tenfold. It offers the option to use e-signatures for clients, live updates from underwriters so brokers can see exactly what stage their case it at, AVMs and a chat function

“There’s a lot more pragmatism and innovative thinking around lending, and a desire to make mortgages simpler in any way”

within our website. The portal also stores basic data, so repeat borrowers don’t have to input the same information multiple times. However, it’s not like speaking to a robot; you still have that that human touch, which is really important. It was a huge project, but the technology we built allowed us to carry on our lending activity as normal, and even led to us doubling our completion volumes—all while keeping the same headcount and maintaining our human touch—so that’s been a really big achievement for me.

What will LendInvest’s bridging division focus on this year?

We are planning to bring some more innovative products out, as well as enhance our current proposition, focusing on AVMs and the legal process and how we can make it easier and better for brokers and borrowers to obtain finance. We’ll also be looking at offering financial support to improve the energy efficiency of properties; even though the government’s been sidetracked by everything else, I don’t think the proposals are going away. There are lots of companies out there that have great tools that can help with energyefficiency improvements, so we’re speaking to them and seeing if there’s anything we can collaborate on.

In addition, we’ll be enhancing our refurbishment proposition to be able to offer borrowers the choice of light, medium or heavy refurbishment, and the possibility to opt for either a drawdown facility or get everything upfront. Apart from that, we’re looking at making the transition process from a

bridging loan to a BTL or a development facility easier with fintech. We want to have a slick process that pulls all the necessary information with one click of a button, so the broker and borrower can move from one facility to another faster and with less hassle.

What are the biggest trends you’ve seen in the specialist finance market recently?

We’ve seen an uptick in our development exit bridging loans, which give developers more time to reach sales at the prices they’re expecting, without the pressure of their original loan expiring and potentially facing extension fees. This also allows developers to potentially take some equity out and start their new project to prevent delays and make sure they’re not missing out on opportunities. Given that there’s still a huge shortage of housing, this is something we’re really keen to assist developers with. We’ve also seen significant demand for bridging loans for property refurbishments in the past six months from investors who are looking to complete a quick purchase, improve the property to add more value, and then either sell it or add it to their portfolio. Regulated bridging is also now becoming a real popular choice, as there’s still uncertainty about where the Bank of England and longer-term interest rates will end—I think this trend will continue, as this allows borrowers to capitalise on opportunities, and gives them an element of comfort for 12 months until they find a suitable exit.

What challenges do you expect to see in the next 12 months?

I think the biggest issue will be the Bank of England interest rate, and where it will end up landing. Many are still expecting it to go up to 4.5%, and that will affect a lot of lenders and people in the market, particularly if swap rates follow. There will also be some problems for lenders that don’t have their tech up to date, as they might struggle to keep up. Speed is of the essence—we’ve got quite a sluggish process when it comes to planning and Land Registry so, if you can fasten up everything else around the lending process using AVMs and online application forms, that will be a good driver of business.

What is one thing that you would like to be added or improved in the specialist finance sector?

I believe brokers and lenders need to be more transparent with each other to maintain a good level of communication. It’s difficult for both parties—for lenders, this is tricky in the current volatile market, as you’re basing everything on predictions. Meanwhile, for brokers, this is challenging as things might change halfway though. However, if things start to come out of the woodwork later, that delays the lending process or, in a worse case scenario, the deal cannot progress any further. This is why transparency is key to a speedy lending process.

“Lenders that don’t have their tech up to date might struggle to keep up”

AFTER GRENFELL: COMPLEX RULES MAKE SAFER HOMES

The Grenfell fire of 2017 claimed the lives of 72 residents of the west London tower block. The tragedy prompted a root-andbranch review of fire safety standards across the UK and new regulations are now on the statute books. But what do they all mean for builders, property owners and leaseholders?

Words by SIMON WATKINS

Last year, the long-awaited Building Safety Act 2022 was granted Royal Assent, creating the Building Safety Regulator. By 4th April this year, the majority of developers had committed to sorting out their past mistakes. In theory at least, there is now a road map for making existing highrise buildings safe and ensuring new developments are rigorously regulated for fire safety. But it has been a long and arduous journey and, while the regulations and government initiatives have been widely welcomed, the devil is still lurking in the detail— and in the practical execution.

The first uncertainty is the lack of uniformity across the UK. Gary Strong, global building standards director at the RICS, explains: “The four nations of the UK are all doing things differently. In Scotland, they’re doing their own thing. In Wales, they haven’t yet decided whether they’re going to sign up to the Building Safety Act (but are moving ahead with remediation) and Northern Ireland is way behind.”

The result is that some of the core legislation passed by the Westminster parliament applies across the UK, but some does not. However, most of its regulations and initiatives provide a blueprint for standards likely to be adopted throughout.

Regulatory road

Before Grenfell, fire regulation was covered by the Fire Safety Order (2005), which required fire risk assessments in commercial and multi-occupancy residential buildings. According to Gary, however, the FSO left two gaps: “The problem was it didn’t say specifically that, in blocks of flats, the entrance doors to each were within the scope of the law. The fire doors at the entrances of individual flats are very important, so that was a big grey area. The second point was it didn’t include the external walls or balconies at all,” he says.

Those external walls and their cladding proved critical. The Grenfell Tower Inquiry, launched in September 2017, established that the cladding used on the tower contributed to the fire’s spread. The specific product was a type of aluminium composite material (ACM) cladding with an unmodified

polyethylene core—ACM PE. Construction products were immediately on the agenda for regulatory reform.

The second key initiative was the Independent Review of Building Regulations and Fire Safety, also set up in September 2017 and led by Dame Judith Hackitt. In May 2018, the Hackitt review published a sweeping report calling for a new regulatory framework. Its many recommendations included: formal duties and responsibilities on constructors; a series of planning gateways to embed fire safety at every stage of new development; the establishment of clear duty holders for multi-occupancy buildings who should be responsible for overseeing fire safety; and new regulatory oversight of construction products.

The Grenfell Inquiry and the Hackitt report had turned the spotlight not just on ACM PE cladding, but also on a raft of fire risks in high-rise buildings. The costs and uncertainty of resolving the issues paralysed the market for leasehold flats in high-rise buildings.

“The majority of people owning properties in high-rise buildings have either not been able to sell at all or only been able to sell to cash buyers,” claims Beth Rudolf, director of delivery at the Conveyancing Association. “In most cases, sellers decided it was easier to rent their property out so they could move and, if they could afford it, buy somewhere else.”

For some conveyancers, the problems were just too much. “Before the recent building safety regulations, some conveyancers just decided they could not act on these properties because it was too niche, too dangerous, or their insurer would not be happy,” Beth says.

Thousands of properties across the UK were thrown into limbo as the likely cost of fixing the problems—and, crucially, who would pay for them—was unknown.

In 2021, the Institute of Residential Property Management and the Association of Residential Managing Agents (since merged to form The Property Institute) surveyed their members and concluded that, where cladding needed to be replaced, the average cost was £22,511 per flat. The survey found some blocks surveyed also needed other remediation, such as the installation of fire breaks, with costs averaging at £25,671 per flat.

So, how could finance providers assess the burden on borrowers and the liability inherent in affected properties?

In 2019, the RICS, working in tandem with the government, UK Finance, and the Building Societies Association, produced a system for assessing external walls and a form to go with it—the EWS1. The form is intended to demonstrate a clear assessment of fire risk of the external walls of high-rise buildings to help determine whether a property was suitable for mortgage.

The EWS1 brought its own challenges, as Gary admits. “It’s been quite controversial, but somebody had to do something. It’s been a steep learning curve, but it has worked well in the majority of cases. There are over 6,000 of these forms to our knowledge that have been created, and they have enabled lending to proceed, because it’s been possible to sign off properties as having no combustible cladding issues at all or they’ve identified a problem.”

In practice, the use of EWS1 was not consistent and, in some cases, it was applied unnecessarily. “At one time, we had forms being put in place on bungalows ,” recalls Gary.

The government made an intervention in 2021 to “reduce needless and costly remediation in lower-rise buildings”, which made clear EWS1 forms were not required for buildings below 18m.

Laws on walls and doors

The findings of the Hackitt review eventually crystallised in two pieces of regulation: The Fire Safety Act (2021) and the Building Safety Act (2022).

The Fire Safety Act requires fire risk assessments to include doors to individual flats and the risk of fire spreading due to cladding and other features, such as external walls and flat entrance doors. This closed the most obvious holes in the previous regulation. At the heart of the new rules was the Fire Risk Appraisal of External Walls (FRAEW), drawn up by the standards body BSI Group.

The Building Safety Act is more wide reaching and gives property owners and developers new statutory responsibilities. Its principal step was to set up the Building Safety Regulator (BSR) as a dedicated body inside the Health and Safety Executive. The BSR came into existence in 2022 with core responsibilities to regulate all high-rise buildings with seven storeys or more, or 18m or higher, and to have a statutory role in all relevant planning applications.

This act creates a register of inspectors, which will open in October this year.

Where the responsibilities lie Previous regulation required there to be a responsible person for safety, who could have been the management company or the landlord of the building, the managing agent, and even leaseholders; often, in a block of flats, there would be more than one responsible person.

The new regulation allows for multiple people to be accountable, but requires there to be a single ultimate point of responsibility. Jaclyn Thorburn, head of public affairs and relations at The Property Institute, explains: “Under the Building Safety Act, for higherrisk buildings there are additional duty holders—the accountable person (AP) and the principal accountable person (PAP). Although there could be more than one AP, there can be only one PAP, and the act sets out provisions for identifying who that should be.”

Jaclyn adds that the PAP for a higherrisk building will have to register it with the BSR. “That register opens in April and you will have six months to register properties,” she advises.

The job of the PAP will be considerable and, as Beth points out, everyone will be starting from scratch. “Whether it is the freeholder, sub-landlord or property manager, they will not have done this before,” she states. There will also be plenty of complex details. For example, they are going to have to check every year that the front door to every flat is fire safe. But often they won’t actually own those doors—they will belong to the flat owners. So, the PAP is going to have to enforce fire safety on the flat owners.”

Similarly, duty holders during construction—which include clients, designers, principal designers, contractors and principal contractors—have new responsibilities for communicating with each other and monitoring all aspects of building safety during construction. Under the act, developers will have to go through three gateways for planning approval.

The first, already in place, is a requirement to address building safety as part of the initial planning application. The second gateway takes place before construction of any high-rise residential building and developers must demonstrate it will comply with building regulations.

Most of the recommendations are coming forward slowly and they are all sensible. My only criticism would be the length of time.

Here we are, nearly six years after the event, and we’re only now actually getting the pieces of the jigsaw put in place”

This is regarded as more than a tickbox exercise and will be assessed in the round. The BSR will need to sign off for a development to pass the second gateway. The third is a further approval required on completion. The developer must show the property built meets the standards. This final approval then forms the basis of one of the most crucial aspects of the new regulatory framework: the golden thread. This will be a perpetually updated record of a building’s safety starting from when it is completed, to then be updated throughout its history by all duty holders, typically owners. The aim is to establish a complete record of a property’s evolution, including any significant renovation and redevelopment. Gateways two and three will come into full effect later this year. In practice, given the timescale of new construction, developers will already need to consider these stages.

The Building Safety Act will create a significant burden for those putting up new high-rise buildings. “It’s a challenge in its own right,” says Gary, “whether you’re an architect, an engineer, a developer, a builder or a surveyor or whatever, it’s a lot to get your head around. There are some in the construction industry

who feel it’s a bit of a sledgehammer to crack a nut. It’s complicated to process and potentially increases liability.”

The final piece of the jigsaw is a new National Regulator for Construction Products. This will sit inside the Office for Product Safety and Standards, with a specific remit to review the safety of construction material and components.

Fixing the past: paying for remediation

The future regulation of high-rise development is only half the story. Existing tall buildings that fail to meet current standards need to be made safe. How this should be achieved and who should pay have been running sores for the industry. Again, the recent regulation aims to bring clarity.

The Building Safety Act outlines a cascade of responsibility. The first line of acountability falls on contractors. In cases where the contractor no longer exists or cannot meet the costs, it then falls to landlords. Should no clearly identifiable single landlord be available, the government’s £5bn Building Safety Fund is designed to step in to cover the costs for leaseholders.

Much of the remediation work on buildings over 18m high has been completed, but this leaves a second group of buildings—those between 11m and 18m. A separate £3bn fund, the Medium Rise Scheme, was launched in 2022 to assist in these cases. This scheme remains in pilot with 60 buildings involved, but is expected to be rolled out over 2023. The scale of this task is unknown as there is no definitive list of buildings in this range— however, the Department for Levelling Up, Housing and Communities (DLUHC) estimated that there are 78,000 residential buildings between 11m and 18m as of September 2021. The same cascade of responsibility applies, with contractors the first in line to pick up the bill. This issue reached a critical stage last month. The DLUHC issued developers with an ultimatum: take contractual responsibility for remedial action on unsafe high-rise buildings or face the ire of secretary of state Michael Gove. Gove has indicated he will ban recalcitrant developers from government work and, ultimately, from carrying out any development at all.

The introduction of Fire Safety Orders

June: Grenfell fire

September: The Grenfell Inquiry and the Review of Building Regulations and Fire Safety both launch

The RICS, UK Finance, and the Building Societies Association launch the EWS1

Fire Safety Act

April: Building Safety Act receives Royal Assent

December: The biggest six lenders agree to provide mortgages on properties covered by government remediation contracts or a government remediation fund

Major developers sign remediation contracts with the government

Opting out of EWS1

Despite the caveats, the agreement reached with major contractors could reduce the need for controversial EWS1 forms. In December last year, the six leading residential lenders—Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide and Santander—agreed not to require EWS1 forms where the property can be shown to be covered by a developer remediation contract or where there are government funds to cover remediation costs. While it is not the end of EWS1 forms, the move by the biggest lenders will remove that burden from many leaseholders seeking to move or remortgage. However, yet again, a solution has created uncertainties. Beth raises the question of who will be legally responsible during a sale or remortgage for ensuring that properties are truly covered, either by a remediation contract or government funding. Her fear is that, in some circumstances, the burden will fall on conveyancers. “The trouble is the complexity. We’re hearing of some conveyancers who are refusing to act on any leaseholds and, where they are acting, they are having to put up their fees,” she says.

Gove brandishes the stick

In January 2023, Michael Gove gave developers an ultimatum: fix the mistakes of the past or face a ban from the industry.

Gove called on developers to sign remediation contracts with the government—legal commitments to repair unsafe buildings—and gave them a deadline of 13th March 2023 to sign on the dotted line.

The majority, including most of the industry’s biggest names, met the deadline. But some failed to do so and found themselves on a public list of shame. This prompted a handful to bow to the pressure and sign.

As of 5th April 2023, 46 developers had signed the contract, taking full responsibility for carrying out and funding remedial work. Four firms deemed by the government to have developed buildings within the scope of the rules have so far not signed the contract:

• Abbey Developments

• Avant

• Dandara

• Rydon Homes

Falling through the cracks

While the cascade of responsibility for remediation covers most eventualities, some people may still find themselves in limbo. If no developer can be found liable and there is no single landlord responsible for a block, the Building Safety Act is the next line of defence for “qualifying leaseholders”. Detailed provisions allow for some contributions to be required, even from qualifying leaseholders, but these are capped.

To qualify, a leaseholder’s property must be their main home or they must own no more than three residential properties in total. Consequently, BTL investors with four or more flats fall through the cracks.

BTL landlords could face large bills, warns Gary: “We’ve seen cases of BTL investors who have bought a few flats that are in their pension plan. Then they get landed with a bill for £100,000 per flat. There’s no way they can afford that, as they don’t have the protections afforded to other qualifying leaseholders by the Building Safety Act.”

He adds that the effect on this can reach far beyond the BTL landlord themselves. “It’s quite rare these days for a private block of flats not to have any BTL investors in there somewhere. So, remediation on the whole block stalls if they can’t agree to go ahead if they own four or more flats.”

Finally, the process of becoming a qualified leaseholder still requires paperwork. A deed of certificate that describes the leaseholder’s circumstances is needed. There is no formal register of these certificates and Beth urges the government to address this: “We’ve been pressing the ministry to come up with some way to register those certificates as a local land charge or with property logbooks, or be attached to the unique property reference number. That would enable everybody to identify whether a leaseholder deed certificate was ever entered into,” she shares.

Achieving safer buildings

The regulatory journey has been long and is not yet over, with numerous pieces

of secondary legislation needed to fully implement details of the Building Safety Act. There is also a raft of issues on remediation, with some leaseholders still being left behind. Nevertheless, Gary’s verdict is largely positive on the recent measures: “Most of the recommendations within Hackitt’s report are coming forward slowly—and they are all sensible,” he says. “My only criticism would be the length of time it’s taking them to do it. Here we are, nearly six years after the event, and we’re only now actually getting the pieces of the jigsaw put in place. In the meantime, leaseholders who are trapped in some of these buildings are suffering and, in some instances, still with dangerous cladding on the outside and waiting for new cladding to be installed.” Despite her own uncertainties over the details, Beth is also optimistic about the new framework: “Yes, it’s complex and it has me holding my head in my hands sometimes. But the reality is it’s going to deliver safer properties for consumers—it really will.”

“The trouble is the complexity. We’re hearing of some conveyancers who are refusing to act on any leaseholds and, where they are acting, they are having to put up their fees”

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A series of experts debate how the commercial property market will fare after a rough economic ride

Words by andreea dulgheru

Over the past few years, numerous macroeconomic factors have battered the commercial property space, but industry professionals are optimistic that brighter days are on the horizon.

Five commercial real estate experts— Charissa Chang, broker business development director at Allica Bank; Mike Davies, head of business development at YBS Commercial Mortgages; James Meigh, director of lending at Recognise Bank; Daryl Norkett, head of real estate proposition at Shawbrook Bank; and Emma Ross, commercial manager at Watts Commercial Finance—share their views about the sector and where the opportunities lie for investors.

Andreea Dulgheru: From what you are seeing, what does the current state of the commercial property market look like?

Charissa Chang: We always knew 2023 was going to be a challenging year, particularly in terms of volumes. With the Bank of England trying to stabilise the market—base rates have dramatically increased over the past six months— what’s clear is that customers are holding off [buying a property] unless moving is a must or there’s an opportunity that’s too good to turn down. We’re definitely seeing this affect volumes. The latest MSCI data showed a 11.9% fall in UK property returns in Q4 last year, and I think that’s a direct effect of the rate rises. There’s a working assumption there’s about 20% less transactional volume in the market— so there’s less business around, but the same amount of brokers and lenders, some of which obviously adjusted their lending appetite. While there’s been uncertainty, I do think we’re on the back end of that. There are still some great opportunities out there and that’s only going to get better now.

Daryl Norkett: That point on the MSCI data is really interesting because most of us in the industry use that as a way of understanding what’s going on with values, yields and rents. You’ve had this dynamic where values are going down but rents and yields are going up, which is unusual because, normally, rents would also start falling when there’s economic trouble—it’s all to do with the interest rate shock. However, our market is very much the SME sector and, while the MSCI reports do have some segmentation on lower-value property, most of the data is based on very large institutional transactions that we don’t typically lend on. The smaller SME investor relies a bit more on local knowledge and seeing where the opportunities are in their areas, whereas the institutional part of the market tends to be a little bit more yield-, investment- and analysis-led. I think there’s more resilience in the smaller end of the market than the data might show at face value.

James Meigh: I agree with Daryl and Charissa. What tends to happen in the property market is that it permeates from the top. All the data shows, as far as the capital markets are concerned, virtually nothing was transacted in Q4 last year. So, what we’re seeing now is a shortage of stock as a result of what’s happened at the top of the market. But I do agree with Daryl—in the SME space, which is predominantly where we’re most active—it’s all about the local investor really understanding their market and what represents good value.

Mike Davies: [YBS Commercial Finance’s] market is around the professional portfolio investor, and we’ve seen the opposite trend in the first quarter of this year. There has been a real spike in applications, and that’s because while the interest rate shock is having an impact on the market, it’s also created some opportunities. If you’ve got cash-rich investors who know their localities really well, some are starting to see good opportunities to buy—unfortunately on the back of a repossession or a portfolio that’s looking to get unloaded, perhaps. Where things have been really challenging is the ability for borrowers to pass stress tests, and this is something we looked at really closely and changed our stress testing to make it more affordable. But, overall, I think the headline data and what you see in the media can be a little bit misleading because there are still transactions out there.

Emma Ross: From my point of view, February was the quietest month I’ve ever had as a broker, which gave me pure fear, and there are a few other brokers out there who said the same. However, I’ve done more in the first week of March than in the whole of February, so this all could’ve just been a wave turn. I do see a lot of people holding back in the hopes that rates are going to drop soon. As for stress testing, that’s the biggest issue we’re having in the BTL market for sure.

“There have been more refinancing opportunities from the high street, where [borrowers] have been asked to go elsewhere”

JM: I think the elephant in the room is that we’ve now got a complete mismatch between interest costs and yields. Quite often if interest rates don’t start reducing, then capital values soften, and we’ve seen that in certain markets and geographies. I’m not saying that we’re facing a property crash but, for a debt-driven buyer to be able to compete with a cash-driven buyer, you need interest rates that are lower than yields—and that isn’t the case on the majority of transactions we are looking at.

AD: From your perspective, when exactly did stress testing become one of the biggest challenges for commercial investors?

MD: I think it was probably the end of last year. It was certainly an issue that we were looking at in November. At that time, we were seeing a fall in business activity because of the interest rate shock, the mini-Budget, and everything that these involved. That’s when we looked to make a change towards December to try to get ahead of that, because we were seeing the increase in interest rates start to impact affordability. At that time, for our business, this was being matched with a trail-off in applications, so it was a double whammy. That’s when we really looked at it and made some changes.

DN: Personally, I’m not sure that stress testing is the biggest problem we have in our proposition at Shawbrook. We switched our strategy around and really focused on fixed-rate products for commercial investment several years ago, even though the market traditionally worked on variable rates. That has really helped us because, like BTL, we use a pay

rate debt service cover ratio calculation for five-year fixed rates. So, affordability works pretty well on most of our commercial and mixed-use stock where the yields are better than they are on a lot of the BTL deals, for example. We’ve seen steady levers of activity, particularly on semi-commercial. I think it’s more about customer sentiment around interest rates as everyone expects they’ll continue to fall further. However, I think there will come a time in the market when people accept that maybe this is where we are for a while, and that’s where I’d expect the transactional activity to pick up again. In the meantime, there are lots of investors that focus on high-yielding investment strategies. We see a lot of deals with small multi-let sites, and those yields are really strong. That activity continues where rates are not as much of an issue for the investor. It’s more about whether they can secure [the property], keep it occupied, and maintain the rent rolling in.

JM: Everybody addresses this slightly differently. On commercial property transactions on a base rate-linked facility, we’re looking at five-year SONIA and applying a bit of a sensitivity to that. The positive thing for me really is that five-year SONIA has come down by 50 basis points recently, which has clearly helped. It is a challenge, and I think it will be some time before things settle, but when we’ve got a five-year swap rate that’s actually lower than the base rate, then I think that is a fairly good barometer in terms of where sentiment is around future interest rates. We’ve tweaked our criteria, but I think it’s something that we are going to have to wrestle with for another 12 months or so.

“I always tell clients from the start to tell me everything they possibly can, otherwise there’s not much point in doing [anything], as it wastes both our time and their money”

AD: Do you think affordability will remain a challenge in the near future?

JM: If you’re looking at finer yielding assets, then absolutely. If you’re looking at multi-let industrial sites, like Daryl talked about earlier, where you’re getting between 8.5% and 9.5%, you can still make these things work with reasonable leverage. What we did—and I suspect other lenders followed suit around October—was make a decision to reduce our maximum leverage on commercial property from 75% down to 70%. However, in reality, that hasn’t affected borrower demand because it’s back to the serviceability point and the level of stress that people are adopting in the analysis.

AD: Based on the level of activity over the past few months, what have been the most popular types of deals you’ve encountered?

ER: For me, definitely bridging. Again, I think it has been used as a short-term solution to try to get themselves on a better rate later on, as they think [rates will] go back down again. Plus, it gives them time to do some work [to the property] to get good tenants in on longer leases, and then go to a tier-one or tiertwo lender with much better rates longer term.

CC: We recently increased our maximum loan size for commercial mortgages to £10m, so I’ve seen a lot of larger loans come through the doors, but we get quite a wide range of assets and sectors. When I look across the whole team, it’s a level split between investment and owner-occupied. We’re also getting a lot of the smaller, sub£500,000 cases. Apart from this, there have been more refinancing opportunities from the high street, where [borrowers] have been asked to go elsewhere. Some SMEs are now changing the way they operate their businesses and what they’re doing—they’re looking to capital raise for growth and diversification, but it’s not necessarily one property type or sector. It’s just a broad range of different opportunities.

DN: We came into the year with an enormous pipeline of commercial mortgage business. So, a lot of what we’ve done is change deal flow by altering our product; we now start commercial investment loans from £1m. One of the

ways we decided to manage the risk in Q4 was to focus on those larger transactions where we can really spend the time applying the depth of expertise we have at Shawbrook to make bespoke lending decisions. Separately, we’re really focused on semi-commercial as a particular asset class, where we think there’s still good opportunity to drive a decent amount of deal flow, but it’s also an asset that is hedged to an extent, because it’s got a residential element to it. We very recently reduced our minimum loan size down to £500,000 for this type of asset.

JM: Yes, I would agree with that. We’ve got lots of clients operating in that mixed-use space. Traditional, mixed-use property is an area where we’re very comfortable. It would probably not meet an ICR or a debt-service covenant from the residential element, but you can certainly cover interest, which allows you to take a bit more of a view on shorterterm leases, re-let periods, and covenant strength of retail tenants, for example. For the retail sector, that’s something we’re still very comfortable with, as long as it’s the right deal and the right sponsor. There are still good deals out there, and it’s back to what we were talking about earlier: knowing your market and the geography. I think the tier-one lenders have got very uncomfortable with retail, whereas I think most of the finance providers around this table think that, with the right case and [client], there’s a deal to be done.

“This is a fantastic opportunity for brokers to show off their expertise and help clients—now is the time that people really do need some help and an expert to talk to”

MD: We moved more towards commercial deals and launched a fixedrate product, which we’ve not had before for commercial investment. We’ve seen a good number of HMO and holiday let deals as well, almost exclusively for portfolio investors.

AD: Daryl and Mike, you mentioned that you introduced fixed rates—something that is a bit unusual in the commercial mortgage space. Has this decision been made on the back of rising demand from brokers and clients?

DN: Yes. We did it maybe five or six years ago to align the product suite with BTL. We could see the benefits of having the certainty of the interest rate payment for the customer and in terms of how we’d look at affordability. Some of our commercial business was grown by the BTL client base maturing and diversifying their portfolios into the commercial property market and, actually, they expect a fixed rate, which is a bit different from some of the investors who started with commercial property 20 years ago and are quite used to having a margin-plusbase loan structure. So, it suited our distribution and client base.

MD: We introduced the product on the back of broker feedback. While we were still seeing demand for that [commercial finance] product, every broker I spoke to was looking for a fixed rate and certainty. I think borrowers have got back to a more comfortable position now where they’re happy to take a fixed-rate option. All our products are five-year fixed terms, so we’re taking tranches and hedging, and obviously pricing is then being determined by what swap rates are when we strike the

hedge. It’s a definite response to market demand—I’m just waiting for the brokers to come and put the applications in now; no pressure, guys! [ laughter ]

ER: I would say most lenders do offer fixed rates now.There are only a few commercial owner-occupied or investment lenders out there that don’t provide this option. It’s not the fixed rate that’s the issue, but rather the commitment terms. As a broker, I’m seeing a lot of lenders— particularly high-street ones—doing this five-year cap on terms. For instance, Allica Bank has committed to a client for 25 years, whereas Barclays, for example, will give a five-year fixed-rate loan and a five-year commitment term—so, at the end of those five years, [the lender] needs to get new valuations done, negotiate new fees, and they might even decide they don’t want [that client] anymore.

AD: What are the biggest areas of opportunity in the commercial property market?

JM: It’s all about sectors within sectors. If I was going to call out one area where there is real opportunity, I think it’s underpriced retail. Over the past few years, retail got hit really hard. The yields moved out, there was not a lot of investor interest, and there were lots of issues with high streets. However, in good market towns where you’ve got good footfall and plenty of chimney pots, there is some under-priced retail out there that I think a lot of investors are interested in. The one note of caution would be to look at the rents: their levels have really tanked, particularly around internal zoning on

high streets. But, if you’re looking at a property where the rent has been rebased over the past couple of years and you’ve got a reasonable tenant and good footfall, I think that’s a great opportunity for the smaller investor.

DN: Yes, I would agree with that. The other thing, which is more about deal structure, is focusing on multiple streams of income. Historically, the best commercial investments would have been deemed to be one large blue-chip tenant so big they would never fail, but modern history has proved to us that no one is too big to fail in any market. Those deals tend to be low yielding, which is more challenging in a higher interest rate environment. The cases that probably look most attractive right now are those where you’ve got a spread of smaller, local SME covenants, where you can drive a high yield and investors can manage the risk through proactive asset management. Rather than relying on covenant strength, these deals rely on a spread of tenants, which means you’re not going to get too many voids at one period of time that put you under pressure.

“Historically, the best commercial investments would have been deemed to be one large blue-chip tenant so big they would never fail, but modern history has proved to us that no one is too big to fail in any market”

MD: I think there are individual opportunities in the market and in localities but, where you’ve got investors who can get a spread of tenants, a range of property types, and a variety of underlying businesses, I think there is real opportunity there because the economy is still in a state of flux and people are able to diversify.

ER: I would say the best [opportunity] is a multi-unit block. For example, two flats upstairs, two offices in the middle, then two retail units at the bottom. That’ll get you sorted because you’ll have a real mixture and you can get a slightly higher rate on a semi-commercial basis. In Glasgow, you’ve got lots of them where it might be two floors of residential, the offices in the middle, then a pub and a restaurant at the bottom. I see that as an ideal [opportunity] for an investor.

DN: All of the things you’ve just described are quite management intensive, and that could potentially mean less competition from a landlord perspective. If you’re a professional property investor, that won’t scare you away because you’re geared up to do that level of property management. But, if you’re a pension fund or a very passive investor—which the commercial sector has attracted in the past because of the long length of the leases—those things might not be very attractive to you because they’re too much work. You’ve not got the management infrastructure to maximise the potential of the asset.

CC: I agree. Just to mirror what a few have already said, there’s definitely opportunity everywhere; there’s not necessarily one particular asset type.

AD: Emma, are your clients looking towards property diversification?

ER: Yes. What I’m working on a lot now is people who were residential landlords but, because the yields are so poor, they’re moving into commercial, so they are new to this market.

JM: This is where we have to be careful in how we support and assist the new commercial landlords, because that grossto-net that often gets overlooked is key when you’re looking at these kinds of opportunities.

AD: And what about the biggest challenges that commercial property investors are currently facing?

DN: If you’re an existing commercial landlord, your biggest challenges are probably trying to figure out what your property is worth and what you should be doing as you go along. We’ve gone through a period of rapid volatility in values, largely driven by interest rates. There have also been some concerns about whether we might go into recession, and there are some structural shifts happening— for example, offices adapting to hybrid working, which has stuck since lockdown. You’ve got the industrial sector coming off the back of a bubble that has burst after being overinflated during the pandemic years, but also a lot of fundamentally sound things that suggest it will still be a good sector in the future with the growth of logistics and e-commerce. There’s just so much for someone to try to figure out what to buy, whether to refinance or not, and how much risk to take on. This is the biggest problem—and all of that, ultimately, drives inaction, as people find it too confusing to make a decision. I think we’re probably still mostly in that space for a lot of existing commercial landlords, and it’s one of the reasons we’ve focused very much on semi-commercial and diversifying BTL landlords in the immediate term. However, I think that will settle down as we get into the summer and the second half of the year— it should be more obvious once interest rates have settled. I think there’ll be a lot

“It’s not the fixed rate that’s the issue, but the commitment terms. I’m seeing a lot of lenders— particularly highstreet ones—doing a five-year cap”

of opportunities in commercial property in general once yields have adjusted, and that means it’ll be a good time for people to come in and buy.

CC: The market’s been full of uncertainty over the past two years, so people are holding back. I think clients and investors just need to ensure that they’re aware of all the changes that are happening, the financial impact of further rate rises and energy costs, and having clear plans. Also, I think brokers should be working closely with clients and lenders to bring it all together; there are some really good opportunities to build lasting, valuable relationships on the back of all of this. I think there needs to be a focus to help guide those customers and clients through the next period of growth.

JM: Daryl made the point that, as yields soften, he sees opportunities for investors to get back in the market but, on the flipside, investors might be sat on a portfolio that has possibly gone down in value. There might be refinancing events they need to consider. I would encourage all borrowers and landlords to engage early with brokers or lenders and have one eye on what they think the market might do and how pessimistic a valuer might be on a revaluation, and try to negotiate fixed rates wherever you can to reduce some uncertainty. Also, borrowers should work with their advisers when it comes to negotiating headroom in financial covenants to remove as much uncertainty as possible.

MD: I think that being proactive is probably the main thing that [investors] need to be. Hopefully, no more big economic shocks are coming but, when shocks do land, be nimble, change your plans and talk to your lenders and brokers—that’s always going to be good advice. As the market becomes more defined, we’re starting to see lenders fall

into certain specialisms and getting better at providing different sorts of products. We can see the same thing for brokerages as they grow, becoming a better source of information and advice.

DN: I think this is a fantastic opportunity for brokers to show off their expertise and help these clients; now is the time that people really do need some help and an expert to talk to.

AD: Emma, as a broker, how hard is it for you to keep up with all these changes and offer quality advice that helps clients?

EM: It’s really hard, especially with everything changing all the time. Keeping up with laws and product changes is difficult, so I try to read as much on this as I can to gain extra knowledge. At the same time, you must be wary as there are so many things that we can’t advise on—for example, tax. You don’t want to get caught out giving wrong advice, so it’s all about helping [clients] along and giving them a hand, but also protecting ourselves.

AD: Do you think that this current situation has highlighted the value of open and honest communication between all parties?

ER: Yes, definitely. I always tell clients from the start to tell me everything they possibly can, otherwise there’s not much point in doing [anything], as it wastes both our time and their money. It’s just better to be upfront with everybody.

AD: In your opinion, how do you expect the commercial property market to evolve over the next few years?

“If I was going to call out one area where there is real opportunity, I think it’s underpriced retail”

DN: It’s very difficult to look five years into the future, particularly after we’ve all been shocked so many times over the past two years—but I think there will be a few structural shifts. In retail, I would expect there to be a swing towards urban living across the high street with more retail premises being converted into flats, and we’ll see a combination of residential and traditional retail spaces. This trend will probably accelerate and continue. In the office sector, I’d expect there to be more focus on meeting and collaboration spaces and possibly less focus on desks as businesses look to adapt to what hybrid working means—so I think the shape of offices will change a bit. London will probably be a particularly strong area for this, because it’s a really good central meeting point, but also other major cities such as Manchester and Birmingham. For industrial, I think there’s a bubble that has burst but, structurally, the rise of e-commerce and the development of logistics will continue, so I think it will be a strong sector for the foreseeable future.

I

LEGAL ADVICE

• Independent legal advice on matters such as: guarantees; joint borrower/sole proprietor mortgages; and occupier waiver forms

• Advice provided by a qualified solicitor (given face-to-face at no extra fee if required by the lender)

• Guaranteed to be provided within 48 hours of acceptance of instruction.

• Advice to comply with any banking requirements.

Mar/Apr 2023 79

Celebrating women

On 8th March, the specialist finance industry came together to celebrate the female figures bringing significant change in this sector. We look back at some of their insightful words of wisdom on International Women’s Day that aim to inspire the new generation and further improve gender equality in our market

We’ve seen the industry come on leaps and bounds in terms of diversity in recent years but, while we have moved forward, there is still work to do and challenges that need to be addressed. We still need to see more women in senior positions such as at board or CEO level. The gender pay gap is still an issue too, and something I really hope that companies in our market look to combat.”

I believe the industry needs sponsors who can help younger women prepare for their next roles and career in finance. Women need to be able to build their own brand and be visible. It is our duty, as women in senior positions, to support the younger generation— this will help reduce gender discrimination in the sector, and help women overcome the reluctance of putting themselves forward.”

Katy Katani director at CapitalRise

When women come together, they not only bring their individual strengths and talents, but also amplify their collective impact. I believe this is key to making progress and driving change in the future. The power of women coming together and achieving great things, despite the hurdles and resistance to change, has the potential to shape a better industry for all stakeholders.”

When I started in this industry 10 years ago, I never had any female mentors; all my bosses were men. Fortunately, I’ve reached a position where I can offer what I craved a decade ago, and I vow to play my part in taking gender diversity to the next level in the bridging world.”

Imogen Williams regional sales manager at MFS

Having a 12-year-old daughter myself, I feel very responsible to use my position and platform to support the battle in overcoming these challenges. Determination and a strong work ethic is key, but we need to provide support in the early stages through education.” — Kate Cowan, chief financial officer at Hope Capital Representation is enormously important. You can’t be what you can’t see, and unless the next generation of talented women can see that there will be opportunities for them within the property finance sector, then they are unlikely to pursue a career in this industry. That’s why it’s crucial for firms to encourage their female staff to take up senior roles within the business, and to give them the same sort of spotlight that their male peers might enjoy.” — Miranda Khadr, founder of Provide Finance

I encourage women that I mentor to follow some advice that I was given years ago: push yourself past where you think your limits are. Take advantage of female empowerment groups, get yourself a good mentor and get yourself out of your comfort zone. You are way better than you think you are.”

— Michelle Lowe, head of partnerships at Somo

When it comes to career progression, the mentor and coaching system is valuable for both women and men as they rise through the ranks. But while it’s widely assumed that women will benefit most from having a female mentor—the idea of learning from someone who ‘has been there herself’ is a pervasive one—male mentors bring other things to the table for female mentees. It is no surprise that genuine support and guidance (and ultimately championing) from male mentors is invaluable to women in the development finance industry, as men still occupy a majority of the seats at the executive table. The responsibility for closing the gender gap rests with the very same executive table.” —

Smithi Sharma, ESG and assurance manager at Atelier

While diversity is important, much has come about by tick-box quotas which I don’t personally think is right. I want to be hired or considered for a role because of my ability, not to tick a box or as part of a publicity stunt. We all want to be treated as equals and sometimes quotas can dilute the talent and push it into the wrong places.”

Natalie Glover associate at SPF Private Clients

My advice to women in property, particularly the younger generations, is to hold your own. Be confident that every person in the room started where you did—at the bottom—and you have as much to add to a conversation as anyone else. If you’re not there yet, then just listen and learn, as that can earn you as much respect as talking in many circumstances.”

Louise Peters property finance manager at Puma Property Finance

I would advise any younger women not to limit themselves to a certain career path, as there are so many different opportunities in finance. Make sure you make your voice heard in your organisation and keep an open mind about how to progress. Know your strengths and carve out your career your way.”

Charlotte Rutter head of marketing and comms at Roma Finance

I think that transparency is key in addressing the gender pay gap in financial services. There’s still a lot of catching up to do to reduce this gap, but if we are all transparent on the benchmark for the value of the role as the driving factor, followed by the experience of the person, I believe this will improve even more in the future.”

Irene Thomas director of lending operations at Assetz Capital

Tanya Elmaz director of intermediary sales for commercial finance at Together

Annaliese Melvin BDM at Glenhawk

AS AN INDUSTRY, WE NEED TO DO MORE TO BOOST THE PROFILES OF FEMALES IN DIFFERENT ROLES IN PROPERTY, INCLUDING SPECIALIST FINANCE, AS THIS EXPOSURE WOULD SEND A STRONG MESSAGE TO THE PUBLIC ABOUT THE COMMITMENT OF THE SECTOR TOWARDS EQUALITY. WE SHOULD ALSO WORK TO REINFORCE THE MESSAGE THAT THE REAL ESTATE FINANCE MARKET HAS EVOLVED, AND IT IS FAR REMOVED FROM THE ‘OLD BOYS CLUB’ REPUTATION OF DAYS GONE BY. SPEAKING FROM EXPERIENCE, YOUNG WOMEN WOULD BE MORE REASSURED ABOUT THEIR CAREER CHOICE IF THEY HAD THE CERTAINTY THAT THE INDUSTRY WELCOMES THEM AND THAT THERE IS A FUTURE FOR THEM IN IT

NORA REBOLE, head of portfolio management (development) at Octopus Real Estate

Following her appointment as partner at Memery Crystal, Laura Brown talks about the legal challenges around arranging specialist finance, how technology can set you apart and what makes a law firm great

Laura joins from Howard Kennedy, where she was a senior associate. In her new role, she is determined to maintain Memery Crystal’s reputation as a specialist in complex finance transactions across all asset classes and to generate additional business. She is also keen to build a culture that will attract and retain talent, and find innovative ways to deliver high-quality services faster and at more competitive rates.

How will your experience help you in your new role?

It sounds a bit twee, but my experiences—the highs and the lows—have made me appreciate the value and resilience of a strong team. It is important to structure a professionally diverse group with a common ambition that can march as one coherent unit. I have been mentored by some superb partners and I intend to do the same for my team members with equal care and attention.

From a legal point of view, what are the main problems for clients and brokers when arranging specialist finance?

One of the biggest is probably a lack of cooperation between lenders’ and borrowers’ lawyers. This leads to frustration for providers and brokers—they undertake a lot of hard work in getting to approval stage and the period between this and drawdown should be relatively short. This usually stems from a lawyer’s inexperience or a borrower’s nervousness about making disclosures. Having lawyers on both sides who understand the sector, lender risk appetites and the nuances of the type of finance is key to achieving a swift, seamless completion. Early disclosure by the borrower of any potential problems also gives lenders and brokers an opportunity to renegotiate terms at the outset, rather than slowing the due diligence process.

What are some of the biggest misconceptions over legals for specialist finance?

With regard to bridging finance, one is that property due diligence should be minimal. While it may sometimes be appropriate to look at indemnity insurance to reduce due diligence levels, it is incumbent on a lawyer to carry out sufficient checks to enable them to advise the

lender of any potential problems with the security that might affect value or impact marketability in an enforcement scenario. How important is technology in the legal process?

Technology is becoming a key differentiator and we must continue to find new ways to do business digitally. For example, electronic signing saves time and costs. I am delighted to see law firms finally starting to look at ways of applying AI to increase productivity and avoid human error. AI can generate as well as analyse content and we are keen to embrace this for lease and title reports to accelerate transactions.

What should brokers consider to avoid legal delays?

Good brokers add value. Intermediaries who gather as much information as possible at the outset about a borrower’s debt position and property concerns help minimise delays. Where brokers facilitate open communication, email ping-pong between lawyers is reduced, if not eliminated.

What characteristic defines a great property finance law firm?

Pragmatism! A great property finance lawyer will find incisive commercial solutions to problems for their client. This period of market stress requires even greater legal agility—lawyers can no longer identify issues and walk away. Property finance matters are rarely linear, so the team must include lawyers with different specialisms, such as banking, real estate, construction, planning, insolvency, tax and litigation. The team should be led by lawyers with market-leading property finance experience and a shared objective to achieve a successful outcome for their clients.

How did you spend your first pay cheque?

I was a trainee lawyer in my early 20s so it probably covered my rent and a night out in celebration of that.

Office, WFH or hybrid? Hybrid. Remote working gives staff a work-life balance, while office working creates a sense of community that leads to collaborative working and knowledge sharing.

What is your karaoke song?

Tina Turner—’The Best’

Your dream job—if you weren’t doing this, what would you do?

When I was younger, I wanted to be a journalist. I suspect that was down to Kate Adie, a woman from North-East England like myself, who gritted her teeth and got on with the job at a time when women in broadcasting were very much in the minority.

Do you have any hidden talents?

I wish! My parents believed every child had a hidden talent just waiting to be realised and I was enrolled in every club—painting, horse riding, ballet, tennis, gymnastics, music etc. I was equally hopeless at each of them.

‘A great property finance lawyer will find incisive commercial solutions to problems for their client’

11 days and £393

Nope, not a (enticingly cheap) holiday offer, instead it is the average* amount of time and money brokers and their clients save when they use AVMs on qualifying bridging deals.

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