Specialist Lending Solutions: How have you found the first six months?
Jonathan Samuels: The first six months have passed ridiculously quickly, almost on fast-forward. It seems like only yesterday that a few of us were sat in a room coming up with a name for the whole thing. Beyond that, the early days of Octane Capital have been really exciting. We’ve managed to hire some of the most experienced and skilled people in the industry and are already well ahead of target in terms of loans completed. The loans we are working on bring a real buzz to the office, too. In some cases, they have been non-standard ‘squared’ and that really appeals to the kind of people we have here: individuals who want to be pushed and tested to find solutions rather than just deal with vanilla loans that can be a bit dull and transactional.
Our message to the market is, if you have a client situation that seems unworkable, we will make it work, however complex, however large or however off-the-wall. Our view is that there’s always a way, but you need a certain amount of experience to find it. We’re particularly enjoying our office in Camden, which is a whole lot more interesting than the city. It perfectly represents the relaxed and easy-going atmosphere at Octane, which is a lot of people who know what they are doing, doing it and having fun at the same time. Make no mistake, Octane Capital is a serious lender and the people in it have lent billions between them, but we’re no longer interested in the corporate formalities that some in financial services feel is a pre-requisite.
SLS: You brought in some old colleagues. How important was it to you to have that team?
JS: Mark Posniak is not as old as he looks, actually. Jokes aside, for me getting the team we have now was essential for Octane to achieve its goals. We certainly didn’t want to create just another lender in what is a very saturated marketplace. Instead we wanted to draw on the experience we have all accrued and create a lender that is the first port of call for anything non-standard, large or highly complex. But we’re only able to do that because we have some of the most talented and proven people in the industry who have seen pretty much every scenario going and know risk inside out. What’s also vital is that we all have each other’s back. Everyone here is perfectly able to work on their own but is always on hand and keen to provide input and experience when asked. It’s a great balance of team players and entrepreneurial self-starters.
SLS: Perhaps the biggest headline-grabber following your launch was the fact you have no products. Can you explain why you took this approach?
JS: During our initial conversations on what Octane would be about, we felt quite strongly that the market is awash with ‘me-too’ lenders that blindly price according to LTV and are in a race to the bottom on rate. Another red flag was looking at LTV as the primary determinant of risk. For us, that’s misplaced. Risk is so many more things than just LTV, to the extent that in some cases a higher LTV loan can be less risk than a lower LTV loan. We wanted to create a lender that would enable us to put this ‘risk-based’ philosophy into practice and having no products has helped us achieve that.
SLS: Is the bridging market getting overcrowded?
JS: That’s probably an understatement. In recent years everyone and their dog has piled into bridging in search of the perceived returns available. And that’s what worries me. Not only do you have a lot of lenders who potentially don’t have enough experience of this area of finance, but they are under pressure to get money out into the market to satisfy their investors or maybe prop up a consumer P2P offering. Bridging and specialist finance needs to be carefully underwritten and looked at in the cold light of day. Being under pressure to lend has the potential to undermine that. Bridging is a niche form of finance and when it starts to feel mainstream, that’s when problems can emerge.
SLS: What is the biggest challenge the market is facing at present?
JS: There are a number of challenges facing the market right now, both internal and external. Externally, you have a property market that is under pressure for no end of political and economic reasons. This clearly has ramifications for every lender, specialist or mainstream, and how lenders adapt to a falling or flat-lining market will be key. In an uncertain market and economy, the understanding of risk is more important than ever. The other challenge is the sheer volume of lenders in the market, which is seeing more and more of them cut rates to be competitive. There’s always a risk when doing this that you are not pricing for risk, something that is accentuated if a lender hasn’t got the necessary experience in-house to start with. I suppose what I’m saying is that a cocktail of tough market conditions and inexperienced lenders has the potential to be lethal.
SLS: What are you plans for the rest of 2017 and beyond?
JS: The Prudential Regulation Authority (PRA) rules are shaping up to be a major market opportunity for lenders like Octane. Clearly a lot of portfolio landlords are going to find it harder to source finance on the High Street as of next month and this is without doubt a gap in the market that we can look to fill. Our ability to provide finance quickly and to be comfortable with the risks associated with more complex portfolios and non-standard finance will position us very well. Other than that, our broader plan is to keep hiring the best people in the industry, keep lending and keep innovating in order to be different.