Aldermore and Allica Bank bolster teams with new hires
Aldermore bank has appointed Joanna Winterton to the role of head of commercial mortgages south and Graham Ritchie to the role of head of commercial mortgages north.
The two new positions have been created to replace the head of commercial mortgages role and reinforce regional support for origination teams serving brokers.
Winterton has more than 25 years of property lending experience and has been internally promoted from her role as a relationship manager within Aldermore’s commercial mortgages in-life team.
Prior to joining Aldermore, she was a business consultant and at Barclays and Nationwide in various property lending roles.
Ritchie has almost 20 years of commercial property experience and was also promoted internally. He was previously Aldermore’s interim head of commercial mortgages, and prior to that, interim head of property development.
Before joining Aldermore, Graham worked at Nationwide, Yorkshire Bank and Bank of Scotland, in commercial real estate, corporate and private banking roles.
John Carter, commercial director for commercial real estate at Aldermore, said: “It’s fantastic to have such an outstanding pool of talent in our team and I’m thrilled that we’ve promoted colleagues from within. Both Graham and Joanna have a tremendous amount of experience and will add greatly to the compelling service we continue to provide our customers.”
Allica hires mortgage operations manager
Small and medium business bank Allica has hired Carly Nutkins as mortgage operations manager.
She joins from Redwood Bank, bringing over 12 years of banking experience and operational know-how to ensure effective processing of commercial mortgage applications submitted to Allica.
The bank has also announced that it will be growing its business relationship management team by more than half to help service the surge in demand from SMEs.
Allica Bank said it has grown its lending capacity to now average over £30 million per month in committed loan offers to established SMEs.
Nick Baker, head of intermediaries, Allica Bank, said: “We’re delighted to welcome Carly to the team, she will drive the ‘engine room’ of commercial mortgage processing – ensuring a smooth, hassle-free application process. We’re also excited to be expanding the team further and are on the hunt for more talent to join our award-winning broker team.”
Recognise begins bridging and commercial lending in accelerated launch
It expects to launch loans for professional landlords and asset finance offerings next year.
The lender, which is part of City of London Group (COLG), started offering four lending products last month – bridging and working capital loans, loans to the professional practice community and commercial property loans.
In its half year results COLG revealed it expects Recognise to bring its full lending capability on stream in April 2021 but had accelerated its move into these four areas.
COLG, which also owns lenders Property & Funding Solutions and Milton Homes, is also applying to change the Recognise name to Recognise Bank to accompany the licence award.
The Property & Funding Solutions book, which had seen new deals put on hold since March, has been used as a seed for the Recognise business.
COLG also revealed a successful £27m cash raise was completed in October which has been invested in the development of Recognise.
“Recognise is now working to complete the development and testing work necessary to position it to receive a full banking licence, with a target to achieve this in the first half of 2021,” the lender said.
“The full banking licence will also be dependent on a further capital raise.”
It added: “As Recognise has now begun lending activities, Property & Funding Solutions will wind down its loan portfolio and Recognise will redeploy the funds as loans are repaid.”
Landlord loans to follow
Discussing its bridging market entry, chief executive officer Michael Goldstein said: “There is already deep experience within the business development and credit control teams to support this market engagement and Recognise is well positioned given that it has no legacy exposure or hangover from Covid-19.
“The senior management team carries the experience of previous crises and is looking forward to helping drive the growth of viable and ambitious SMEs as the UK economy begins to recover.
“Looking forward, 2021 will see loans for professional landlords and the development of an important asset finance capability.”
The firm delivered a £348,000 loss in the first six months of its financial year from April to September, however this included the £2.77m cost of its banking licence application.
The bridging operation secured a £200,000 operational profit while Milton Homes produced a £3.4m profit, although the broking arm Acorn to Oaks recorded a £16,000 loss as business was hit by Covid-19.
Recognise re-deploying funds
Goldstein continued: “We are delighted that our Recognise subsidiary achieved a major milestone when it received authorisation with restriction from the Prudential Regulation Authority (PRA) with effect from 10 November.
“As Recognise has now begun lending activities, Property & Funding Solutions will wind down its loan portfolio and Recognise will redeploy the funds as loans are repaid.
“The results of Milton Homes for the period were pleasing, reflecting both an increase in the number of reversions and the removal of the uncertainties on the future strength of the UK housing market that depressed the March valuation.
“Covid-19 adversely affected the commercial finance broking division of Acorn to Oaks as there was little activity in that market in the first half of the year although there are now signs of improvement which should benefit the second half.
“Overall, looking forward, we are well placed to implement our core strategy of developing a business focusing on the SME market that will deliver value to our shareholders,” he added.
InterBay relaunches commercial mortgage offering
Earlier this month the lender also reintroduced its semi-commercial product range after it withdrew from both markets earlier this year as the pandemic hit.
The new commercial product range has rates starting from 5.74 per cent with two, three or five-year fixed terms and goes up to a maximum 65 per cent loan to value (LTV).
Loans are available between £150,000 and £1.4m for properties up to £2m in value, however the lender noted that it will consider larger loans or property values if requested.
It added that brokers with a proposal are encouraged to speak to their local business development manager for guidance and to help tailor their application.
OneSavings Bank group sales director Adrian Moloney said: “InterBay Commercial are back to doing what they do best, offering their intermediary partners a range of commercial, semi-commercial and buy-to-let propositions, fully supported by an award winning business development team.”
Bridging and commercial finance D2C comparison site launches undercutting advisers
The Propp website has gone live with 40 lenders and claims to provide bespoke quotes for borrowers within 24 hours which on average save over £9,400 per year, based on the negotiated interest rate.
It is led by a trio of former John Charcol directors – Peter Williams, Ben Larkin and Paul Elliott.
Williams and Larkin left the firm two years ago to form their own wealth management business, while Elliot joined the Buy to Let Business (now Dynamo) in 2017.
Williams is chief executive officer of Propp, Elliott is managing director, while Larkin has taken on the role of chief technical officer.
The firm says by digitising much of the process, including rate negotiations, digital signatures, and electronic identification it can cut the average bridging loan completion time below the current 52 days.
It also “aims to remove industry-wide bias towards preferred lenders and certain types of agreements” by accessing a wider pool of lenders.
Consider more applications
MT Finance is one of the first lenders on board and director Tomer Aboody praised the development.
“The website is very user-friendly and gives borrowers a solid spread of the lenders currently operating within the specialist property finance market,” he said.
“The process is extremely transparent, delivering a rationale to every search result and even provides users with a clear indication of savings on each loan.
“As a lender, it’s encouraging to see innovation in the property finance market that will enable us to consider more applications.”
‘Fed up of brokers’
Property developer Mike Stenhouse said he used the service “after getting fed up with the lack of transparency and slow speed we’d seen from some brokers” and could not speak highly enough of it.
“They beat rates we’d seen from brokers by several tenths of a per cent, saving us thousands of pounds across the project duration, and we felt like we had much better clarity on who the right lender was for us.”
CEO Peter Williams said: “Propp has been purpose-built to shake-up the archaic specialist property finance space and bring it in line with the demands of today’s borrowers, who are accustomed to the convenience and transparency of automated technologies and instant, high-quality customer service.
“For too long the industry has rested on its laurels when it comes to automation and real transparency for its customers.
“The seasoned team we’ve built is committed to leading the industry by example.”
Chartmead advises Mulberry Homes on £8.7m deal with Paragon
The deal, which was advised by Chartmead, covers a 57-property scheme of one and two-bedroom apartments.
The funding enabled the refinance of the freehold of the site at Brook Road, Redhill in Surrey and also supports the build costs to complete the project (pictured), estimated at £6.5m.
It is the first deal Mulberry has completed with Paragon and it expects to complete the project in spring 2022.
Steve Mountain, senior relationship director at Paragon, said: “It is great to be able to support Mulberry Homes with funding for this scheme.
“Over the past few months, it has been our priority to support both new-to-bank and existing clients, so we are pleased that we are able to begin building our relationship with Mulberry through assisting with this development.”
Stewart Penney, director at Mulberry Homes, added: “The support from Paragon has been vital in enabling us to continue with the development of the site, of which we obtained planning permission for twelve months ago.
“The development will bring more much-needed housing within easy reach of London.”
UTB and Paragon make development finance hires
Ejikeme (pictured) joins from Oaknorth Bank where he worked as a senior manager of property development, while at UTB his role will involve supporting housebuilders and developers in the South and East of England.
He has nearly 15 years‘ experience in property finance and has previously worked at Lloyds Bank and Secure Trust Bank.
Ejikeme will be based in London and work with UTB property development director Phil Kirkwood.
He will be primarily responsible for promoting the lender’s development finance offering to SME house builders, developers and property investors.
Adam Bovingdon, senior director of property development at United Trust Bank, said: “We’re continuing to expand the property development team by recruiting experienced property finance professionals with the skills and drive to support SME developers and housebuilders across the country.
“Achi brings with him nearly 15 years of experience working with a wide range of customers on a variety of development projects and most importantly he shares our passion for delivering outstanding customer service. He is a valuable addition to the UTB team.
Paragon adds relationship director
Paragon Bank has hired Toby Burgess as a relationship director to its development finance team.
He will be based in the London office and work with SME developers across England and Wales, focussing on originating loans secured on residential projects.
Burgess has experience in financial services and property finance and he joins from Wellesley Finance where he was lending manager. Prior to that, he worked at GFI Group.
Burgess said: “I am delighted to be joining Paragon’s development finance team. I am looking forward to helping Paragon to continue to grow its development finance business as well as working with a variety of creative and hard-working developers and housebuilders.”
Robert Orr, development finance managing director at Paragon Bank, added: “Bringing somebody in with Toby’s expertise and experience will help us to continue supporting our current and new to bank clients, while growing our loan book.
“We have remained active throughout this challenging period when other lenders have retrenched and, looking forward, we are confident in the prospects for the market.
“The demand for new housing looks like it will remain strong into the future and smaller developers want to work with a bank that is consistent, is financially strong and has the experience and expertise to support their business,” he added.
HTB launches low LTV band for large loans
The new product will fall under the same standard criteria as other buy-to-let lending and is available on loans from £1m to £15m.
Marcus Dussard, sales director for specialist mortgages (pictured), said: “This announcement today is a testament to HTB’s confidence in the buy-to-let market.
“I’m genuinely thrilled to be able to offer our lowest-ever five-year rate. This will be welcome news to our broker partners as they continue to make the most of the opportunities and strong demand from borrowers.
“It will also give a further boost to help stimulate activity and support our brokers in finding the best solutions for borrowers.”
Alex Upton, commercial director for specialist mortgages, added: “This proposition fills an obvious gap in our offering and provides brokers with even greater choice and flexibility. It would be an easy win to open the floodgates and offer this on all lending.
“We have decided to focus on deals over £1m to ensure we continue to service all new and existing business to the same high standard and turnaround times our brokers are used to.”
Commercial property polarised as rents and values fall – RICS
Overall rents are expected to fall by around four or five per cent year-on-year by the middle of 2021, according to the Royal Institution of Chartered Surveyors (RICS).
However, this is likely to be highly segregated with retail properties expected to suffer the greatest falls, likely into double digits, while industrial and logistics spaces may even see rent and values rise.
RICS economist Tarrant Parsons told the Nara property receivers conference: “I don’t think there’s ever been a time where the market is so polarised at a sector level, but I don’t think it’s felt the full force of the economic consequences of what’s going on.”
Parsons added: “On average commercial property rents may fall by around four or five per cent year-on-year by the middle of 2021.”
“As of September estimates had rents down by two per cent based on the year before, so there’s still quite a way for rents to fall on this analysis, but that does mask what’s happening across the sectors.”
Retail and office turmoil
While the turmoil in the retail space has been exacerbated by the pandemic pushing more online shopping, the diversion away from office working is expected to make a significant change as well.
Parsons noted that property values in the retail space were already down by around 15 per cent this year, with office values dipping four per cent.
Demand for retail space is falling at sharpest pace since the late 1990s and vacancies are rising at the quickest pace on record since that period, according to RICS.
“Retail is in incredibly bad shape and it is difficult to imagine this getting better any time soon,” Parsons said.
Projections show rents in retail could fall by more than 10 per cent.
Demand for office space has plummeted with changes to working habits looking set to cause a lasting shift in how office space is utilised.
According to a RICS survey the most common expectation is for businesses to cut back between five and 15 per cent of office space, with an expected fall in rents of around five to seven per cent.
“We’re not talking about the death of the office sector, although 10 per cent would be a hugely significant shift,” Parsons added.
Industrial sector positives
In contrast, the industrial sector appears to be weathering the storm fairly well and has potential for growth afterwards.
Industrial buildings were worth only one per cent less in September than at the start of 2020, but they had started to show signs of recovery over the previous four months
“While the outlook is subdued, other areas do have potential to grow rapidly further ahead,” Parsons continued.
“Expectations are moving positive across industrial and logistics already with the growth of online shopping.
“And data centres are another example of a more positive outlook, that’s another area with pretty strong growth potential.”
Minimum space standards for permitted developments from April
Housing minister Christopher Pincher confirmed the move in response to a written question from Labour MP for Mitcham and Morden Siobhain McDonagh.
Pincher said: “We laid regulations before Parliament on 11 November which will introduce a requirement that all homes delivered through permitted development rights meet, at a minimum, the nationally described space standards.
“This requirement will come into effect on 6 April 2021, and will apply to applications for prior approval submitted on or after that date.”
The issue has been a high profile one as the government is keen for permitted developments to form a key plank of its strategy for delivering more new homes.
Earlier this year research conducted for the Ministry of Housing Communities and Local Government (MHCLG) found studio flats measuring just 16m2 in several permitted development (PD) schemes, while natural light was often far more limited.
When pressed on the matter prime minister Boris Johnson failed to fully commit to a minimum size for properties built through permitted developments, but the policy was eventually announced last month.
The measures mean that all new homes in England delivered through PDRs will in the future have to meet the Nationally Described Space Standard.
The space standard begins at 37m² of floorspace for a new one-bed flat with a shower room (39m² with a bathroom).
The downfall of P2P lending: self-valuation, excess capital and no experience
RSM Restructuring Advisory partner Damian Webb told the NARA property receivers conference the shocking details of how the once booming P2P property lending market collapsed.
Webb has been examining the sector for several years, with the last 18 months spent trying to recover as much funds as possible for investors in the collapsed firm Lendy.
He detailed how priority was placed on creating value for shareholders and lending out money with little regard for standard underwriting principles which eventually cost the retail investors significant sums.
More failures to come
Lendy is the highest profile of these firms to collapse but there have been others and Webb believes there will be more to come with others still in trouble.
“There are a number of operators in that space that will do well, they are well run they’ve got a good client base and they will continue, but the market is moving very much towards alternative lending out of institutional funds,” Webb said.
“We’re getting this natural selection for the benefit of the market because the poor players are effectively being killed off because they are not competitive.
“The future is alternative lending – P2P may be an aspect of that but it’s going to be a very small aspect with the main source being alternative lenders.
“I think there will be more failures in that P2P space, but it has largely been fixed or closed down by the Financial Conduct Authority (FCA),” he added.
More tech than finance
The historic failures in P2P lending over the last decade can be generally summed up by shareholder greed, too much capital, using technology to cut out credit risk processes, and lack of experience in lending.
“Many of the people involved in fintech were more technology than finance-based, they had no financial background,” Webb said.
“There was no grey hair, there was no experience, people just jumped into the sector, worked out there was an ability to deploy money and did so with minimal review of credit or understanding of lending.
“And they went in to areas I think they deemed to be simplistic, i.e. property lending, but they didn’t really understand the issues involved.”
Webb explained that all too often technology automation was at the expense of normal credit processes and therefore at the detriment of lending.
“So often the credit processes were automated and based on third party data so there weren’t the normal checks and balances you would get at standard institutions or more experienced institutions,” he continued.
“People were dependent upon and relied upon the technology and didn’t really understand whether they were doing the right process.”
‘Fintech was sexy’
Webb also revealed that many lenders had benefitted from huge excess liquidity, potentially receiving as much as £10m to £20m a month so the emphasis was on deploying capital quickly to hold on to the investors coming in to the business.
Instead of asking ‘Is this deal right?’ the need to deploy capital quickly was behind many of the decisions being made.
And he adds that many of those involved were drawn to building the value of the business, not sound investments.
“Fintech was sexy and many of the shareholders were concerned with equity value creation and announcing the value of the business,” he continued.
“The metrics were simple – there was a sizeable loan book and the profitability and ability to attract new customers.
“So having credit checks was an inhibitor of the growth of the value of the business and that’s what many of the shareholders wanted, they wanted equity value creation.
“And therefore they would bend the credit processes to ensure the value being created in the business and this fundamentally dis-aligned interests.”
‘Run roughshod over credit processes’
At the weak firms, it was typically young and inexperienced individuals leading and there was often no senior or corporate governance.
This meant firms “run roughshod over credit processes and standard banking processes that had been in place for years, creating significant value for themselves in the business but at significant expense of the retail investors investing into the platforms.”
And there were lack processes around valuations where borrowers were allowed to appoint their own valuer.
“The borrower would then say the value needs to be ‘X’ and the valuer would sign off on it and you would consistently see valuers working on a range of projects for the same lender,” Webb said.
“The P2P lenders would also lean on the valuers as they wanted to deploy the capital, so it wasn’t just the borrowers.
“So they would encourage the valuation level and would ignore things such as connected party leases, they wouldn’t read the title documentation properly, they wouldn’t engage properly.”
There are still some concerns around bounceback and CBILs loans within P2P lenders, which Webb says is producing some “very strange behaviour”. “There’s huge liquidity and still very strange practices,” he said.
Regulation and institutional funding
However, the P2P lenders left behind are largely driven with funding from capital markets and other institutional sources now, providing a safer environment with checks and balances in place.
Webb emphasised that those lenders able to attract the institutional funding are generally those with stronger governance and credit processes which these investors look for.
“A lot of the issues have been weeded out by regulations and by institutional capital coming into the sector. So the sector is in quite a good place from those perspectives,” he added.