In June, Adam joined the bank to help expand its lending to clients across central London and the South of England.

Before joining UTB, Adam was vice president — head of origination at Hilltop Credit Partners, and also worked at specialist lender Octane Capital, where he was a senior manager.

How have your previous roles prepared you for this one?

Adam: The structured finance offering blends the entrepreneurialism seen in family offices and private lending with the competitive costs and robust risk approach of banking. I think understanding how appetite evolves across high and low risk/return environments is the key to unlocking affordable, truly tailored funding. I think taking on roles where I’ve worked in specialist areas — be it complex bridging, super-stretch development finance or term lending — provides different approaches to managing risk and allows you to really offer the perfect solution to suit a borrower’s requirements.

Why are you focusing on expanding lending in London and the South East in particular?

Gerard: Adam’s appointment coincides with a change in the model for UTB’s structured property finance team. We have established an enviable track record while building a robust loan book with a significant amount of repeat business from our core client and introducer base, all the while keeping the team lean.

What steps are you taking to achieve your goals?

Gerard: We are growing a dedicated sales team to operate around the proven relationship manager model and providing more education around our solutions-led offering and product set, particularly as we face market uncertainty.

What are the key challenges you’re seeing in the region you will be concentrating on?

Adam: I think the main challenge at the moment is inflation and the monetary policy surrounding it. In the past few years, we have all benefitted from low interest rates and both stable costs in construction and operational areas which has brought a lot of healthy competition into the market, giving borrowers more options on the basis that there was more certainty around the variables involved in underwriting deals.

From a broker and borrower point of view, the changing of pricing and withdrawal of products which the rate rises have triggered makes certainty of funding much more of a consideration.

From a lender’s point of view, it makes underwriting short- to medium-term facilities a more complex process. On short-term loans, extra consideration has to be taken around potential maximum lending terms at refinance, as term lenders reassess how they stress test and development finance providers increase contingencies and interest provisions. On medium-term facilities, there’s a fine balance between conservative forecasting with strict interest coverage covenants and being able to offer competitive terms.

•   Hilltop launches real estate funding and management platform
•   UTB lends £9.3m to support Lincolnshire housing development
•   UTB expands property development sales team

Fortunately, UTB’s structured property finance offering provides flexibility around how each loan is structured, underpinned by a deep understanding of the lifecycle of property assets. We have the ability to underwrite the exit on almost all of our bridging loans, either with our own improvement/term loan offering, or to another specialist team in the bank. We can fix interest rates for a period on our term facilities, and we can approach interest coverage creatively to help maximise what we can offer our borrowers.

What are the positives you’ve noticed?

Gerard: Individuals and businesses remain acquisitive which keeps the market moving; I think the general market outlook remains positive for residential property. There also seems to be a healthy recovery in quite a few asset classes which were previously struggling. A lot of the trouble these assets had pre-Covid remain, but ambitious, capable operators have been able to take advantage of rock bottom prices and reposition them.

How do you see things moving for London and the South East in the next year?

Gerard: Areas with strong fundamentals continue to perform, notwithstanding uncertainty. While many predicted a deflating London market following the success of working from home, it appears many — and particularly larger employers — are encouraging flexible working rather than abandoning office bases completely. I therefore think prices for houses should remain buoyant as people continue to maximise space, but remain within commutable distance of their offices.

Adam: While flat sales may experience a slowdown, I think there’s a huge opportunity to use this fact to pivot towards affordable BTR schemes. As rising interest rates and construction costs cannibalise returns for pipeline schemes, these can be offset by instead holding assets and seeking yield. BTR sites typically benefit from being well located for amenities and constructed for energy efficiency, so may become a strong choice for affordability if transport and energy costs continue to rise.

Land values could start to dip due to increasing construction costs and interest rates. Demand has continued to see higher land purchase prices over the past 12 months, so it would be interesting to see if the lack of supply supports prices, despite increasing costs.

Is UTB mulling over entering new hotspots?

Gerard: Hotspots are difficult beasts to tame. There are a few areas in and around London which have quickly gone from hotspot to oversupplied. As a business, we consider most locations and sectors in terms of appetite and can structure deals in a multitude of ways. This means we have the agility to support seasoned investors and developers taking advantage of the right opportunities quickly without being concentrated on one specific market or asset type.

How do you compare structured property finance to other areas you’ve worked in, including pre-development, property investment finance and complex bridging?

Adam: Structured property finance shares many overlaps with almost every area of property finance, but can have several advantages including the ability to view a term deal through the lens of a complex bridging lender. For example, to offer keener pricing to an offshore borrower or provide a longer-term funding solution which is creatively structured to help overcome a short-term issue.

Another is being able to work with a developer for the lifecycle of an asset. You could support the acquisition of a commercial asset while it’s taken through planning, fund its repositioning, and then refinance it out on a term facility if it’s being retained. It is also advantageous to have an appetite across multiple sectors without having to limit the product on offer.

What are your lending targets for 2023?

Gerard: That would be telling our competitors more than we’d like to! However, with a bigger team and a robust commitment to lend, we are looking to maintain our record of consistent growth.