"Commercial property will be a fascinating market to watch in the years ahead. It's at an historical, almost epochal juncture, but I’m confident the long-term outlook remains positive. "
We spoke to Nimesh Sanghrajka, managing director at Mantra Capital, about the positive growth in SME lenders and where he sees the commercial property market in three years' time.
CR: What are the core areas of finance that Mantra Capital focuses on?
Historically, one of our main focuses has been property investment and development finance, as well as general commercial mortgages. But one of our biggest growth areas at present is business finance in all its myriad forms. Essentially, we find we’re increasingly helping entrepreneurs and SMEs secure the finance they need to grow or operate more efficiently. We’re doing this in a variety of different sectors, from healthcare, leisure and retail to manufacturing, education and franchise businesses.
While this finance side of our business is growing exponentially, we still arrange buy-to-let and private client residential mortgages, often the more complex variety involving offshore ownership structures. Lastly, we advise on corporate protection, in other words ensuring that the key individuals in a business are covered from a life and income protection perspective. In summary, we cover pretty much anything and everything relating to commercial finance.
CR: What would you say is Mantra Capital's biggest differentiator?
Without doubt it's the fact that all the senior team here come from a banking background and understand, at a granular level, how high street and challenger banks operate, what they look for in a borrower and the various metrics they work towards. The days when a borrower, such as a business seeking growth capital to scale up or a way to improve cash flow, would speak to the local bank manager are well and truly over. There are now simply too many lenders for this to be viable.
Our informal company mantra, excuse the pun, is "bankers acting for you" and that really does sum up what we're about. Because of the proliferation of challenger banks and specialist lenders, we like to think we have replaced the bank manager of old, who you would go to by default. Clients come to us instead and we work like a prism into the market as a whole. Whatever the finance you’re seeking, business or property, we can help.
CR: What are the key trends you’re seeing in the market at the moment?
For me, without doubt, it's the rise of the challenger banks and specialist lenders, which are reshaping the entire UK finance sector. Putting to one side the big challenger brands that we already know about, there are many more new bank applications currently being reviewed and processed by the PRA and FCA.
Both business and property finance are evolving at a breakneck pace, despite Brexit, and liquidity is rife. But while this is a positive for anyone seeking finance, as they have significantly more options open to them, it does represent a challenge of its own. The sheer number of challengers and specialist lenders on the ground means it's far harder for an individual or business seeking finance to understand which route is best for them and the necessary processes needed to give them the best chance of a successful outcome.
As a company with a background and expertise in banking, strong contacts across the sector and a knowledge of the quirks and inclinations of each individual lender, this is where we like to think we can add value — as a 'relationship keeper', if you like, between the client and funder. Relationships remain a fundamental part of the commercial finance sector but with the sheer number of lenders in the market today you have to know how they all operate to ensure a quick and seamless application. Oh, and you also have to be confident to tell prospective borrowers that the cheapest rate is not always the best option.
CR: What, in your opinion, could be done to build more homes?
Well put it this way, there's certainly not a lack of desire from developers to build and funders to lend. Liquidity, as mentioned above, is rife and the number of innovative and proactive SME developers emerging is great to see. The stumbling block, and most people reading this article will almost certainly agree, is the planning permission side, which remains overly bureaucratic and continues to move at a glacial pace.
Yes, there have been some improvements, specifically in the office-to-resi space, but compared to where the finance sector is, planning remains in the dark ages. There's a huge appetite to both build and fund the homes we need but currently the sector is being strangled by planning red tape.
CR: Where do you see the UK’s residential and commercial property markets in three years?
The residential market has clearly come off the boil in areas that have seen extraordinary growth, such as the capital. For me it's a necessary correction and crucial for any growth moving forward to be sustainable. Equally, there are areas beyond the capital that are seeing relatively strong house price growth at present, such as Birmingham, Bristol and Peterborough. While cities like London come back down to earth, these are speeding up, and in the next three years this recalibration, or rebalancing of the market, is likely to continue. While Brexit could throw a curveball at the market, overall I'd expect the UK residential property market to move forward in the next three years but at a sensible pace. I don't expect it to go off a cliff by any means.
The commercial property market, by contrast, is a lot more complex. The entire business sector is evolving as more and more people work remotely, while the retail sector in particular is undergoing seismic change as the shift online continues apace. What we've seen with Toys R Us and Maplin in recent months is symbolic of the change that's happening. The days of unwieldy fixed overheads and huge outlets are, for many businesses, long gone. This certainly doesn't spell disaster for the commercial property market because businesses, in retail and beyond, will evolve, but what's clear is that it's the companies that embrace digital that will thrive and those that don't that will fade away. Commercial property will be a fascinating market to watch in the years ahead. It's at an historical, almost epochal juncture, but I’m confident the long-term outlook remains positive. The high street of old is not dead, but it is going to be fundamentally different.
CR: What would be the ideal headline you’d like to see in the specialist lending media?
"Mantra Capital completes record IPO"? OK, jokes aside, how about "Mantra Capital arranges £1bn of loan finance".