“If a deal makes sense, we can get it done”


Steve_Matthews_Octopus Real Estate (1)

Octopus Real Estate is stretching its tentacles towards the Bridging Loan Directory to help make the UK property industry more environmentally and socially conscious.

The group, which is a stablemate of renewables energy firm Octopus Energy under parent investment firm Octopus, is spearheading a number of ESG focused products, services and developments.

This is both in the investment side of its business which includes managing a portfolio of modern, purpose-built care homes, retirement communities and affordable housing, and its lending arm comprising residential bridge and buy to let, commercial bridge and term, and development.

On the investment side Octopus, which in 2019 merged its real estate activities in healthcare and property lending into one team with £3.5 billion of assets under management, announced its entrance into the UK Affordable Housing Market.

As part of the move Octopus will work with Housing Associations to provide long-term, patient capital to the sector to fund the delivery of new homes.

This followed a commitment from the group in March to build all new care home developments to net zero standard by 2030.

“As a B-Corporation everything we do has an ESG (Environmental, Social and Governance) focus to it. It is in our DNA,” explains Steve Matthews, Head of Residential Lending at Octopus Real Estate. “We want to make an impact.”

Indeed, on the lending side Octopus has recently partnered with Homes England to create the Greener Homes Alliance. It is committing £175 million to provide loan finance and expert support from Octopus Energy to SME housebuilders to build greener homes.

Those homes achieving an Energy Performance Certificate rating of A secure interest rate margin discounts of 2%.

“It is a really popular product amongst developers and it is keeping our development lending team busy,” says Matthews.

“The involvement also shows the strength of our wider group. We don’t just say to developers ‘Go and build us a top-rated EPC building from scratch’.

We provide consultation and expertise from Octopus Energy to help them achieve it. It makes the property more attractive in the end.”

Residential lending, both regulated and unregulated is one of the group’s flagship products. It positions itself in the market as being able to handle the more complex cases that “often fall outside mainstream lending criteria”.

This includes providing loans on property that a client lives in, plans to live in or can’t sell before completing a new purchase, or buy-to-let loans to first time buyers, ex-pats or foreign nationals.

On the unregulated side it is also very busy lending to developers looking to retrofit run down properties and sell them on for a profit.

Matthews says having the power of the Octopus investment arm behind it means it can be very “aggressively” competitive on rates and be able to make quick lending decisions.

“Clients want to use bridging for those unsexy things like chain breaks or downsizing,” Matthews says. “They want the deals done nice and quickly and we can deliver at speed for them.”

Helping in this aim is the group’s Fast Track Service which includes AVM, loans between £150,000 and £500,000, 70% LTV for purchases, reduced legal due diligence and no search indemnity used.

“We are very unique in that a lot of our funding is in-house. We are not a bank, and we don’t have a lot of red tape. If a deal makes sense, we can get it done,” says Matthews. “We are very modest in our approach to lending taking no unnecessary risks.

That’s helped by having a very experienced 80 strong team with expertise in each business unit. With us you get the whole life cycle of real estate from land with planning all the way through to development and lending.”

Octopus, which has offices in both London and Manchester, usually lends to seasoned, experienced property developers but will also work with first timers. “If we understand the deal and the model makes sense, we are keen to help,” Matthews says.

The demand from old and new developers alike remains strong despite the continuing pandemic and global economic uncertainty this year.

“When the pandemic hit demand was very stop, start. There was caution regarding how much exposure lenders and borrowers were prepared to take,” Matthews states. “But investors and developers are by nature entrepreneurial. If a deal is going to be done, they won’t let a pandemic stop them.

In terms of volumes, we are certainly back to pre-pandemic levels, if not above. It is being fuelled by cheap debt on the market and strong appetite.

We’re seeing that all over the country including the North where buy-to-let is currently more attractive than the South.”

In its development business it is seeing more demand for medium sized to larger residential schemes of between 30 to 50 units in central locations. On the commercial side, which includes bridging loans and term loans, it is again seeing demand for ‘big ticket stuff, brownfield sites being redeveloped and regenerated”.

There is also strong interest in industrial particularly warehousing as the e-commerce boom continues.

“There is no concern at the moment about the economy. Deal over-run is a reality of the current issues in the supply chain and there could be the potential of some impact to deals in a rising rate environment,” Matthews states.

“We have to be conscious what it means for housing demand if rates do continue to climb and add that in our credit decisions. But we are still being very commercial in our attitude and actively deploying funds.”

Matthews is confident that Octopus Real Estate will keep growing year-on-year and expanding. Since 2005 it has lent more than £5.7 billion throughout the UK and issued 4,100 loans.

Last November it moved beyond the mainland for the first time when it started offering commercial bridging loans in Ireland.

Developers there have had access to short-term bridging finance upwards from 500,000 euros on all types of commercial property transactions including acquisitions and refinances.

“We are keen to understand the strengths and weaknesses of this new market,” Matthews says. “There are no plans for residential at the moment.”

If that changes then BLD readers will be amongst the first to know. “We are joining the Bridging Loan Directory because the readership numbers are huge and right in our sweet spot of products,” explains Matthews.

“It will help us raise our profile and meets our agenda around giving strong and honest content and education to our existing and prospective customers. I don’t like those stories where lenders just talk about a new headline rate here and another one there!

The industry deserves more than that.”