"Not for a minute do we think we can just rock up and pick up where we left off with Dragonfly. We need to show brokers that we are offering them something totally different"
FR: You recently returned to the specialist lending market with Octane Capital, which offers a bespoke model with no LTV bands or product sheet – what sparked this decision, and how else will Octane differ from other lenders?
When I left the specialist lending market I was busy doing a number of things, not least launching a company providing car finance to Uber drivers. But I continued to take an interest in the industry and found that it was a lot easier to have a bird’s eye view from my position outside it — away from all the noise, if you like. As an outsider, I could see the movements of all the key players a lot more clearly than in the past and, over time, began to sense an opportunity at the more complex end of the lending spectrum. The opportunity continued to nag away at me, as the vast majority of lenders were focusing almost exclusively on vanilla. I was also regularly meeting up with Mark Posniak, who lives nearby, and he’d keep me up-to-speed on the latest goings-on. That piqued my interest even more and, over time, one thing led to another and here we are today.
Our decision to launch without a product sheet was the result of a detailed analysis of the sector. A number of us spent a lot of time going through what lenders were doing, where the market was headed and what was right and wrong. The major takeaway, by a distance, was that the entire bridging sector had become very formulaic and was blindly pricing according to LTV. In the past two to three years there has been a huge influx of vanilla lenders and we didn’t want to go anywhere near that kind of ‘me too’ model. We wanted to play to our strengths and we felt our main strength is our understanding of risk, even within the most complex deals. That enabled us to move away from the rigid LTV-based approach to lending to a risk-priced approach, and that’s when we thought we’d launch without any set products. We’re calling this approach the ‘third generation’ of bridging – taking the professionalism and transparency of the ‘second generation’ of bridging (post 2009) and blending it with the highly bespoke way loans were made before the Global Financial Crisis (the ‘first generation’).
I think the other key differentiator between ourselves and the competition is that we are the polar opposite of transactional lending. Our goal is to work with brokers as a lending partner, one that will always look to find a solution rather than just tick a box and give a yes or a no. Everyone here has worked with brokers for a long time and that’s what they were telling us they wanted. So that’s what we put together. So far, the demand for this ‘partnership’ approach to lending has been phenomenal.
FR: How has the bridging market changed in the past few years, and how will Brexit and the wider economy continue to affect the sector in 2017?
The bridging market, as touched upon above, has become very vanilla. You have dozens of lenders all doing much the same thing and pricing according to LTV. The only way they can compete is on rate and so it’s no surprise rates have come down as much as they have. It’s become a big race to the bottom, which we think is a dangerous development in itself. But that’s another story.
As for how Brexit and a slowing economy will affect the specialist sector, yes, there may be an impact but I don’t think it will be significant. When we launched Dragonfly back in 2009, the economy was in a dire state and the property market was a wasteland. But that was the environment we thrived in. Remember that even in the ‘bad times’, there are always opportunities and the people prepared to take them. That’s where specialist lending can come in. A good specialist lender can operate in any environment, however politically or economically volatile.
FR: To what extent has technology sparked growth within specialist lending?
Technology has created growth in all sectors, and specialist lending is no exception. But at the same time this is a sector where there needs to be a solid amount of human intelligence and highly experienced decision-making. Technology, in whatever guise it comes, will only get you so far. Specialist lending is all about risk and an underwriting team made up of experienced and highly skilled humans, for now at least, is worth its weight in gold.
FR: What goals do you have for Octane Capital?
It’s still very early days so for now we need to dig in and do the hard yards. Not for a minute do we think we can just rock up and pick up where we left off with Dragonfly. We need to show brokers that we are offering them something totally different and prove that, for anything out of the box or more complex, we should be their first port of call. We’re taking nothing for granted. At the same time, and as Pos says, we are certainly not here to make up the numbers. We are hungrier than ever to lend, have an exceptional funding line and what we believe to be the most experienced team in the industry in the engine room. Ultimately, if we can create a lender that brokers gravitate to and value, that will be a major achievement.
FR: What advice would you give to brokers who are new to the specialist lending market?
Don’t assume that cheapest is best, because it rarely is. Oh, and give us a call, we’d be happy to chat.
FR: If you could see any headline about specialist lending in 2017, what would it be?
“Octane Capital loans £1bn in first year.” OK, that’s not going to happen, and we probably wouldn’t want it to happen, but it has a nice ring to it... I think a better headline would be something along the lines of: “Specialist lending market sees double-digit growth in 2017.”
