Segments like healthcare, senior-supported living and education have comprised over 50% of Puma’s loans over the past two years. In total, the company — which recently celebrated £1bn of lending — has provided over £400m on social infrastructure since the beginning of 2020. 

“We take our social responsibilities as seriously as we do delivering returns for our investors,” said Paul. 

The most popular types of social infrastructure projects the lender has funded are to do with healthcare and education. Paul explained healthcare demand was a long-term trend due to people in the UK living longer.  

When it comes to senior living schemes, Puma has seen more requests for purpose-built care homes. Paul detailed that this had been stoked by ongoing demographic pressures along the flight to quality, a consequence of the pandemic.

“We do not set specific targets for deployment in the [healthcare and senior living] sectors, but we are confident we will be highly active for many years to come,” stated Paul. 

Touching on education, he noted that demand for PBSA still exceeded supply within key university towns.  

“It’s traditionally a defensive sector in times of economic uncertainty, with more people staying in education for longer both to improve their longer-term prospects and because of perceived weaknesses in the job market,” Paul added. 

Puma is also eager to back up-and-coming sectors, as well as those recovering from the pandemic’s impact. 

“Good examples of this would be co-living and speculative offices, both very much geared towards assets with strong sustainability credentials, which aligns with our focus on our social responsibilities,” he highlighted. 

“The BTR sector has rapidly established itself as a popular asset class for institutional investors and occupiers alike,” Paul imparted. “This trend towards alternative residential offerings such as BTR and co-living is one that we can’t see reversing. As younger generations are less likely to be buying homes, but don’t want to compromise on their quality of living, we are focussed on opportunities with purpose-built, high-quality developments that address that need.”

Paul said Puma’s interest in the less established co-living sector was down to the feeling it had the potential to be the next BTR.

The development market’s current biggest challenge

Paul – who is also the CFO of investment manager, Puma Investments – currently sees inflation as the biggest hurdle in the development market. Paul said when inflation, which he described as the “big bogeyman,” is left uncontrolled, it erodes confidence on several levels.

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“Developers are unable to pin down ever-changing construction costs, rising interest rates make developments more expensive to fund, and rising yields deflate end values,” he explained. 

“The danger is that in this environment, development activity slows and then stops. But that is not without its costs for developers, who will be holding land funded with expensive bridging debt. Also, contractors who are currently raising their prices rapidly, will in time have to curb this if they want to keep winning business. So, we do expect development activity to continue and for the market pressures to self-correct over time.”

Paul added that while some commentators are comparing the situation to the 1970s, the global economy is starting from a base of very low interest rates, so there is a possibility for rates to climb to fight inflation without inevitably creating a global recession. However, he added, it is undoubtedly “a very real risk.”

The chartered accountant shared how developers can mitigate today’s market hurdles and ensure the success of their developments, such as having well-constructed assets in the right spots in order to ride out more challenging economic times. 

“We are encouraging the developers we partner with to focus on fixing their build costs as much and as early as possible through a fixed-price design and build contract, and factoring in larger contingencies to their appraisals than would previously have been the case,” stated Paul. 

He added choosing a main contractor was even more vital than usual, and strongly encouraged developers find firms that can present a strong balance sheet and have experience in working through former economic cycles.

“The UK continues to be heavily undersupplied in good quality and affordable housing, student accommodation, care homes and senior living, so there are still lots of good deals to be done,” Paul commented.

“Non-bank lenders such as Puma have grown market share substantially since the financial crisis as they retain the flexibility and willingness to accommodate higher risk — [something] the more traditional banks do not — as well as having the ability to execute quickly,” he said.

Scaling up

When asked about what helped Puma achieve its £1bn milestone this year, Paul said its reputation as being dependable and trusted had contributed to its success.   

“Our strong track record has attracted £500m of institutional capital in recent years, which has allowed us to scale up lending activity materially,” he said. “We also do roughly one-third of our business with repeat borrowers who have had a positive experience with us, and who we’ve fostered good relationships with.”

The University of Oxford graduate added the company’s readiness to lend across different sectors, even in tougher times, has also helped. A case in point is how the lender continued to support the care and hotel sectors throughout the pandemic. 

What’s ahead?

Moving forward, Puma intends to invest in its team, infrastructure and brand-building. Refining its technology is also expected to improve the finance provider’s service to borrowers and increase transparency and efficiency. 

“Fundamentally, our relationship-lending approach is about our culture as a business and a desire to be responsible, decent people. That goes to the heart of who Puma is, and we are determined that will not be changing,” Paul said.   

Although it plans to remain a development-focused lender, it also sees opportunities supporting the stabilisation of many of the operational real estate assets it funds, according to Paul. 

Additionally, the £300m funding line from Waterfall Asset Management Puma secured in January this year, alongside the £200m from RoundShield that remains open, allows the company to lend up to £50m on an individual loan, and therefore compete in more areas of the market. 

Paul added the £1bn turning point was certainly considered as the start of its growth trajectory. 

“We are ambitious but responsible at the same time; we will look to grow our lending activities in a sensible and sustainable way.”