United Trust Bank aims to build long term relationships with its customers and brokers, supporting them through the economic cycle and enabling them to develop and grow. One such partnership is that between United Trust Bank’s Structured Finance team and specialist brokers, Bircroft Private. We interviewed Gerard Morgan Jackson, Head of Structured Finance at United Trust Bank, and Tom Robinson, founder/director of Bircroft Private to find out what makes a successful lender/broker relationship tick.
Five years ago, Gerard Morgan Jackson, then working as the Head of Sales for United Trust Bank’s (UTB) Bridging division, set up a dedicated ‘Structured Finance’ team to deal with UTB’s more complex property funding requests. Since then it has completed around £1bn in loans working with a carefully selected group of specialist brokers catering for borrowers with complex property requirements.
Tom Robinson is a founder/director of Bircroft Private and over the last few years has built a strong relationship with the Structured Finance team and the Bank, often introducing clients whose circumstances or requirements needed a more flexible or creative solution than that on offer from other lenders. By working closely, they have been able to create long term, beneficial relationships between client, broker and Bank which have helped all three to develop and grow and their business.
Tom Robinson – Bircroft Private
Interviewer (Int): Tom, for those who don’t know much about Bircroft Private can you tell us a bit about the company and your customers?
Tom Robinson (TR): Bircroft Private is a longstanding debt brokerage which formed in 2010, following the collapse of the Dawnay Day Group during the financial crisis. David Birchenall, Mark Selwood and I started the company having all worked together at Dawnay Property Finance which was founded by David in the mid-90s. Now we’re a successful brokerage serving a relatively small number of HNW individuals and third-party managers looking after private family offices. We’ve done big deals for institutional level clients, but our sweet spot is deals from around £5m-£50m but we do smaller deals for longstanding clients too if required. We’re all property. Mostly development, commercial, mezzanine, stretch senior and of course structured finance.
Int: And where does your new business come from?
TR: Recommendation mainly, often from agents and lawyers or existing clients. We don’t market ourselves hugely because to be honest we don’t want too many clients! We like to work closely with a select number of clients who are consistently doing good business.
Int: Gerard, how did UTB’s Structured Finance team come to be?
Gerard Morgan Jackson: I was working in the Bridging division and I knew early on that I preferred working on the more unusual cases which had a challenging security or a challenging client or both.
TR: I’d worked with UTB for a few years and met up with Gerard and Brad Illman. We got on well, but I only ever did the occasional simple deal with them. When Gerard told me he was setting up a new team and that it would be more useful to us at Bircroft, I was really interested.
Int: What was it about the new Structured Finance offering that made the difference?
TR: It was the attitude from the whole team. Of course, it helps a lot that Gerard and the team understand deals, knows what the Bank’s credit requirements are and structures solutions well and ensures that there’s also this strong desire to get cases to completion.
Int: Can you give me an example?
TR: Sure. Take Ajsela (Cela). In many ways I have very little to do with Gerard past structuring the deal and getting it through credit. Ajsela picks up the case and pushes it on until it completes. She’s massively efficient. If something needs doing, she’s dogged in her determination and she gets the job done. If there’s a hold up, she gets on the phone to whoever needs to sort it and she keeps it moving. That kind of personal involvement and determination to get a case completed is unheard of and it’s a real selling point of UTB’s SF service. We were doing a commercial refinance on a property in the city, UTB needed some information from the previous lender before drawing down. It had been requested but they weren’t rushing to help. Ajsela got fed up waiting, picked up the phone, called the lender, got the person she needed and the info she needed. Then she called me. ‘Job done Tom’, she said. ‘We’re drawing down’. That determination to see things through is rare outside of UTB.
GMJ: It’s an attitude that runs through the team. We aim to head off problems before they arise. Foresee the difficulties and crack those early on. Then if more crop up we deal with those too. We don’t wait for someone else to pick up the ball because in most cases they won’t, or they will take forever. We align ourselves with the needs of the broker and his client. Our relationship with Tom is like his relationship with the borrower. They trust Tom to do a great job for them. Tom trusts us to do a great job for him.
TR: That’s the key. Trust. I trust Gerard and the team to get the job done and they know that if that doesn’t happen there will be consequences for me too. I may have built up a relationship with a client over 10 years or more, they may earn us regular fees. So, I have to consider carefully who I trust to look after them because if the deal is screwed up, if they lose out because a lender I recommend doesn’t deliver the goods, that’s going to reflect badly on me. It may cost me their trust, their future business. That’s a big risk.
Int: How has the relationship with UTB enabled you to build your business?
TR: On a few occasions now, UTB have looked at clients I think have potential to become really good, long term business for us but were struggling to find a lender who’d give them the support they needed. Maybe the return on the deal didn’t warrant the work involved or there just wasn’t the appetite. A really good example is Rivers Birtwell. They’d done some great smaller developments converting family homes into shared student accommodation and doing it really well. They wanted to scale up and they couldn’t.
GMJ: They were financing one project at a time often shopping around with different lenders for each stage of the development. One to buy the property, another to fund the works, another to convert it to an investment loan. It was complex, time consuming and expensive but they couldn’t seem to break out of the cycle.
TR: They came to see me about three years ago and their original idea was to find an equity partner. Someone who’d give them £5m to invest in projects and take 50% of the profit. I sat down and worked it through with them. I told them that they didn’t need an equity partner, that with the right lender and with the debt structured correctly, they could do it all through debt. It would be a smaller margin, some fees for the funding of course, but they’d keep all the profit and all the control and they’d be better off.
GMJ: Tom gave me a call about them and it sounded interesting, so we went down to Brighton to meet them. There wasn’t a deal on the table at that point but we had a couple of hours with them getting to know their business and discussing what their ambitions were. The meeting went well and they agreed to let me go down again, sit with their financial analyst and really get under the bonnet.
TR: That’s an important point actually. They were mind-blown that a lender would take that time and effort to go through the books and projections and actually help them build a financial model. Lots of lenders aren’t interested in even meeting the clients, even in the pre-Coronavirus world they weren’t. Challenger banks particularly are moving everything to fintech and want everything on their ‘portal’. They hardly ever meet their clients.
GMJ: Meeting clients works both ways. We wouldn’t want to lend to someone without meeting them so nowadays with social distancing we’re using technology to ‘virtually’ meet them and when this pandemic is all over, we’ll go and meet in person. It’s particularly important to us because of how we want the Structured Finance division to develop. We’re interested in a relationship with our clients, not a deal. We want to be banking these clients for years, not just the duration of a project.
Int: So how did the second and subsequent meetings go?
GMJ: They were reluctant to open up at first. There wasn’t much trust between them and their existing lenders. They were presenting their plans to fit what they believed a lender would do rather than what they actually wanted to do. Once they understood that we wanted to help them grow and that we wanted to tailor a solution to fit their needs, we built up some trust and they were very open but it was a big mindset change for them to give full disclosure.
TR: Initially I had colleagues questioning why I was putting so much time into this company doing small deals. Their average transaction size was under half a million.
GMJ: We asked ourselves the same questions. The SF team generally does multi-million pound deals so when we discussed the initial Rivers Birtwell proposal in the Credit Committee, we took time to describe what the long term aim was. That we didn’t just want to do small deal after small deal following the same pattern they’d had with other lenders. James Greenyer and I both sit on the Bank’s Credit Committee and it’s very much a collaborative process when reaching credit decisions. That proximity is a definite advantage with Structured Finance proposals when the nuances may need some explaining. Anyway, we did a couple of smaller facilities with Rivers Birtwell and we got to know each other better and eventually UTB gave them a £20m facility for five years. They can run as hard as they want now, acquiring properties as and when they find them. They can go and do 20 projects a year now if they want to. It has transformed their business.
TR: I don’t think there’s another lender who’d have put the work in, then agreed and completed that facility. But it’s that attitude to want to do deals, to find solutions which meet a need, which makes The Structured Finance team and UTB stand out. We saw the potential. So many lenders at the moment, especially on smaller ticket projects, won’t stray from the tick-boxes. UTB are totally different. They’re keen and flexible. Anyway, Rivers Birtwell are very happy. Their turnover has increased dramatically, they’re buying lots of properties and they’re in control of their business and keeping all of the profit. UTB and I are both happy because we’ll have fruitful relationships with a successful, growing company for many years.
Int: Has having a positive experience with UTB encouraged you to work with other clients who might have initially seemed too difficult or unusual to help?
TR: If a client or deal is complicated for the right reasons and I feel the client is worth pursuing then yes of course, it’s essential to have lenders who want to do deals. Few lenders want to put the work in though. Try anything complicated with a clearing bank and you are banging your head against the wall. There’s no point even starting. Clearing banks are not great at specialist property lending full stop and I’d be surprised if they were making much money at it. Movement has been towards debt funds in the last few years and they are considering smaller deals but not really what we’d call a small deal – under £10m. So, although there is some appetite from them above £10m, UTB can do those deals too and do the smaller deals. There are very few lenders in that space. As I said before, although the Challengers are there, they want to do everything online and that’s not suited to Structured Finance. Complex, off-shore structures, bust former companies, these aren’t unusual for HNW clients but they don’t go down well on portals. A lot of the challengers also want a personal guarantee regardless of the LTV so there are a lot of requirements which our clients just don’t fit.
GMJ: Do you remember the Finchley deal we did? That would never work on a portal.
TR: Yes, that’s a good one. the company was registered in the BVI, , and building ten flats on Finchley Road. Other lenders wouldn’t do that one because of the off-shore structure. But I took it to UTB, and they were interested. It was complex too. They had to buy several parcels of land, various second charges and then the borrower wanted to secure the whole lot against a single property in Wentworth. Most lenders wouldn’t even look at it. A lot of my clients are old school. Even though offshore structures aren’t that popular anymore they’re happy to remain as they are and don’t want to change their structure simply because a broker or bank tells them to. A deal has to be pretty vanilla to work on a portal and if it’s that vanilla they probably don’t need a broker anyway.
Int: Presumably challengers and clearing banks which are automating more of their services are looking to attract customers with lower pricing. Does price feature highly when talking to your clients?
TR: Every client is interested in what it’s going to cost them, but in my experience the cheapest routes turn out to be the most painful and carry extra costs when it all goes pear shaped. I’ve had to beg clients not to take that route sometimes because I know that nine times out of ten they’re going to regret it in three months when it’s bogged down, going nowhere and they’ve clocked up £50k in extra fees anyway. If you’re looking to fund a purchase with a fixed completion date you can forget the clearing banks. They just don’t have the skills, desire or determination to get it done. There have been numerous times when I’ve been proven right and we’ve scrapped the cheapest lender and gone back to UTB when we should have chosen them in the first place. Clients tend to only do that once thankfully. A big part of the UTB difference is the flexibility to a look at a difficult deal and then the certainty that they’ll deliver on their promises.
GMJ: Not all brokers are as client focused as Tom unfortunately. Sometimes it’s not the lender’s pricing and the best deal for the client which decides their recommendation. We enjoy working with Tom and brokers with a similar approach to helping their customers. We look for partnerships where the broker’s values are aligned with our own. We want to add value and deliver a quality service at a competitive price.
Int: Tom you’ve clearly developed a very strong relationship with UTB but is it an issue to keep recommending one lender to the same client?
TR: On most occasions it is going to be simpler and more cost effective for a client to stay with UTB for a second or subsequent deal. However, I agree that can be a challenge as a broker because if you keep using the same lender the client may start to think why am I paying a broker when we keep going back to UTB? You have to build a strong relationship with your client and add value in other ways. Some banks don’t make that easy for you by targeting your clients direct. For instance, wining and dining your clients without you and I have 100% confidence that’s not going to happen with UTB. There’s a real trust between us because of the longevity and depth of the relationship. That’s rare.
GMJ: Tom adds a lot of value to a transaction for his clients. You don’t keep clients for 10 years or more by simply going through the motions. We’re both committed to delivering the best outcome for the customer and that’s much easier to achieve when you work together.