West One arrived in the commercial mortgage market this summer, piloting a product with a select number of brokers. With the official launch now gone live, Danny Waters, CEO, and Duncan Abraham, regional director for the North, talk about applying a bridging culture to commercial, the new team in Manchester, and what you should always keep in mind
Duncan Abraham: The pilot started circa 12 intermediaries, which quite quickly became 30 when word got out that we were looking into the commercial mortgage proposition. The first stage was, for me, to reach out and speak to those intermediaries -a lot of whom I’ve got a really good relationship with-and just ask them what’s missing in the market. If we were to enter the commercial mortgage space, what would we need to do to gain significant market share?
So, armed with all that information, myself and the rest of the exec team at West One devised a product that we really felt ticked a lot of their boxes. With that, we needed to provide a service proposition that matched too. Phase two was to then design the product. We created it, sent it out to our pilot partners and gave them early access.
Danny Waters: I think there are some interesting points about the commercial market. Clearly, there’s a distinction between the banks and non-bank lenders. In my mind, I think the general consensus is that banks have capital advantage over non-bank lenders can be incredibly competitive on price, which gives us an advantage when we’re actually designing products.
The usual gap between banks and non-banks, in terms of your residential mortgages, second mortgages and other types of products, is not necessarily so wide in the commercial market. So, that’s a great attraction from our perspectives because we think that we can be as competitive as some of the challenger banks out there with regards to pricing.
DZ: How did you determine when the right time to launch was?
DW: The feedback has been good. As Duncan said, we started with 12 brokers, and that was deliberate. We just wanted to make sure that, if we failed with some of our early processes, it would be in a very contained and controlled environment with partners whom we know intimately across the broader group. When word got out that there was quite an interesting and compelling proposition being delivered by West One, all of the old friends within the industry reached out and asked us if they could have access to the product.
Being a supporter of the intermediary community, we definitely wanted to make sure that the partners who have deep and meaningful relationships with us weren’t at a disadvantage early in the roll-out of the product. Thankfully, from my perspective, one of the things we did was hire a very experienced team, and Duncan heads that team. Naturally, the team are highly capable. So those concerns that you naturally have when you’re launching a product never really materialised. In actual fact, he launched the product on July 2nd and his first completion was 8 days later. In the commercial mortgage market, that is just unheard of.
Part of the reason was that we had a bunch of people anticipating the first case after working behind the scenes to build and test the platforms, so when the first application came in, it was treated as if it were sacred and precious. We had a team of people with no other pipeline to manage, and, therefore, they could accelerate that case through. It was also packaged really well. It was in advanced stages with another lender, and we could offer cheaper pricing.
DA: While we’ve been in pilot phase, we’ve been working hard behind the scenes, so the pilot brokers haven’t seen this, but we’ve been making little tweaks to processes and some additional hires. We wanted to make sure that the proposition we were offering at the trial phase- which, as per Danny’s point, has been getting some excellent feedback- was something we could sustain when we go into full launch.
So we’ve been doing that in the background, and we feel full launch will be ready at the beginning of October. We would have liked to have done it a little sooner, but we just wanted to make sure we had the right number of colleagues in place, because the last thing we wanted to do was launch a product that wasn’t ready.
This is now ready for full market launch. We feel it’s ultra-competitive in terms of rate and service. And going back to the original point about the trial and what the brokers were looking for, we felt that there was a real gap in the market for someone who was competitive on both price and service. An I feel – and I know Danny agrees with this – that what we have produced now fills that gap.
DW: It’ll be interesting because, when we take a step back and we look at the market that we are observing with the possibility of entering it, what are the things that we’re seeking? First, we want to know: what’s the size of the market? The commercial mortgage market is pretty big. It’s probably got fewer participants than some of the other, more congested spaces within the specialist finance space. And that is for a couple of reasons.
Financing is more difficult in the commercial mortgage market, so how will we raise our capital? For the banks, it’s more expensive than other, more vanilla products. And then there’s also the expertise that’s required due to the asset volatility compared with the residential property market.
My belief, when we were looking at this, was that there are many pretty good market participants, but I think they’re all a bit bloated. And my thesis is, if we can take the kind of energy and the dynamism that we have within the rest of our business, bearing in mind that the heritage of our lending products comes from bridging finance, then we will be in a really good place to address the commercial market and bring something different to it.
And I think the firm has lots of experience in the commercial mortgage market. We’ve originated over £1bn of commercial mortgages, but they’ve all been short, not long-term. Using that experience, using our intellect and being able to understand and underwrite really complicated structures effectively serves us well as we move into this market.
DZ: Has the programme highlighted any areas of improvement that could help borrowers and brokers?
DW: I think it’s fair to say that, with all pilots, your technology lags behind because it’s the most labour sensitive thing that we have to do, and it takes time. Also, across our broader business. We’ve got six or seven products, and the rest of the group are also utilising IT and developer resources. So, trying to establish a new system or make refinements to and existing system is just time-consuming.
I think we didn’t have the confidence to have a broader launch without having the technology support to be able to scale. That’s been delivered now, and we’re comfortable – we’ve tested that it’s in a good place. And Duncan is now trying to get a few more bodies in the business so that we have surplus capacity for the volumes that we’re expecting. That launching in the beginning of October is a really exciting for the business.
DZ: Danny, you describe the launch of commercial mortgages as a core component of West One’s growth strategy. What specific market gaps or borrower needs motivated the move into this area?
DW: It’s a combination of two things: what does the market need? What does the customer need? And it’s also a natural extension of the West One product group. What is the next evolution for us? Over the last 10 years, we’ve rolled out multiple products. For me, the obvious omission in the product range was for the commercial mortgage market. I think it’s quite an attractive market, as I’ve mentioned before.
The competitive landscape is less congested. The margins are actually quite attractive in the space if you can finance yourself really well. And then some of the competitors, the feedback that I hear from brokers in the commercial mortgage market is about immense frustration.
They can pay out bridging finance loans usually in 2-3 weeks, but it takes them 3-4 months to complete the same commercial mortgage transaction. For me, that just doesn’t make much sense. Often, they’re the same type of assets, the same type of borrowers; the only difference is the duration in tenure. It shouldn’t just take the amount of time to process and complete mortgage applications.
So one of our big opportunities in this market, as I mentioned, is to bring the kind of service delivery that we have in other parts of our business, whether that’s bridging, second mortgages, resi or even construction finance, to the commercial mortgage market. I think, if we do that, we win the hearts and minds of the broker community and the customer base.
DZ: Duncan, you joined West One with over 26 years of experience under your belt. Talk us through joining the lender.
DW: There was a brilliant CEO. [laughter]
DA: Aside from that, I’ve been in the industry now for 26-27 years, and I’ve known West One to be a heavyweight in the sector-full of ambition, full of growth plans and a business I’ve admired from afar. Danny and I have known each other for quite some time. The business itself is something that I have admired and when the opportunity to join the group came about, it’s just one that I knew was the right step for me. It was the right business, under the right leadership.
They gave me the right motivation as well. Being able to start the commercial mortgage proposition, taking it from inception all the way to launch, has been something that I’ve never done before. So it was the right challenge for me. To open up a new office as well, in Manchester, and to build a new team was just new office as well, in Manchester, and to build a new team was just new and invigorating. It was definitely the right thing for me.
DZ: What does commercial lending demand look like in Manchester compared to other cities? What makes Manchester the right location for the programme?
DA: I think there’s a commercial opportunity everywhere; however, I think the North West in particular, which is the area I know, is a real hotbed of activity. If you look around Manchester specifically, there are cranes everywhere in and around the city centre and surrounding areas. There is so much development, whether that’s housing, apartments, student accommodation and commercial. It’s going up everywhere.
That just felt like something we could tap into. Manchester, the North West and the North of England, because of all those opportunities and all that development that I’ve just described, lean into our entire product offering, we do residential mortgages, development, BTL and bridging. That gave us the opportunity to make Manchester a new place, geographically, for us to grow.
DW: That was tactical for the business, too. If you think about it, we had about 300 colleagues in our Watford-based office. We’re a pretty big employer in that local community, and the supply of talent at some point starts to dry up. So, in order to fulfil our growth ambitions, and potentially more capacity to grow, not just in the commercial mortgage division but also across the entire group.
DZ: What has the Manchester team achieved since the office opened?
DA: Well, we’ve moved once already, so we’ve outgrown our first office.
DW: We’re really bad planners in terms of office space. [Laughter] We’ve already upsized the space of the office as we’ve hired more people to come in.
DA: What we’ve done is we’ve managed to grow a team, like Danny said, of talented, experienced commercial underwriters and processors. They’ve worked with us to finesse the process. They’ve brought a lot of experience and broker knowledge and understanding and, from an underwriting perspective, they are really experienced.
What we’ve done is look at nearly £500m worth of applications in 6-8 weeks’ time. We’ve completed nearly 10 applications and, as Danny mentioned, the turnaround time that we’ve been quoted for other lenders in this sector is three months. We shouldn’t have completed one yet. We’ve completed double figures already.
And that’s because, A, we’ve been able to focus on those applications and, B, we’ve managed to build a process that is fast, reliable and efficient. We’re working with a really good solicitor who has the same ethos as us, which is providing the best service we can for our brokers and our customers. And we’ve just made sure we’re in a really good place so that, when we go into full market launch, we’re ready. And that’s what Manchester has allowed us to.
DZ: What makes a successful underwriter and what advice do you have for those starting out?
DA: First of all, you need to learn. Learn, learn, learn. It’s complex, but simple, but you really do need to understand your business’ risk appetite, while also having an open mind to every application, because each one is different. Every personal situation is different. Every commercial situation is different.
Having an open mind really helps and, even after 26 years, I develop every day. I’m still learning. Now, sometimes Danny and I will have a conversation about an application, and he’ll say something and I’ll go, “I didn’t think of t that way”. It’s being open-minded to that.
Understanding the role of the intermediary, I think, is important in our sector. This means having an acknowledgement of who does what in the process, and understanding the value of the intermediary and what they can bring to the journey. If you understand that, and you work with them and you work with them well, the result for that customer is fantastic. They get a great customer journey. You meet their requirements, which is exactly what an underwriter’s role should be.
It should be receiving an application and going, “Right, where’s the best fit for that applicant?”, and working with the lender and the broker to say, “I can get that now to completion, as quick as possible, as seamlessly as possible, and to fulfil the expectations of the customer”. If you have that in the back of your mind as an underwriter, you’ll succeed.
DZ: What’s your strategy for managing your team in Manchester now? How do you go about motivating or encouraging them?
DA: First, I’ve hired a really good team manager, a gentleman called Paul Hughes, with a lot of industry experience. I’m really optimistic about this. It’s something new.
The way I made the move and the motivation I have is what all my team have got. Every day, we have a huddle. We talk about this new process, this new product, the fact we’re launching something into the market. I don’t have to motivate them. They’re already motivated about that message. It’s really clear. At our office, it’s a buzz of activity. We’re hungry for those applications coming in. We want to get them done as quickly and as efficiently as possible. So the team is kind of a little bit self-motivated.
However, the goal has been to get this launched. And, when the full market launch happens, we know that that phone is going to ring and it’s going to ring a lot. They’re waiting for it. We’re all excited about this journey that we’re going on. We know the growth plan. It is an ambitious growth plan but we know we’ve got the right people to achieve that. Everybody’s really motivated.
DZ: West One has gone through a lot of developments this year alone, including reaching certain lending milestones. Danny, what do you attribute this success to?
DW: The business has been very successful for a long period of time. It’s now developed some real competitive advantages. The cost of our capital as a non-bank lender is probably lower than that of anyone else out there. We’ve got significant shareholder funds and equity, which gives us advantage as well.
We’ve got a highly motivated and capable management team; I think we have the best management team in the market. There’s also continuity in that management team, which is also important. If you look at our executive team, with the exception of me, who has been around for 20 years, most of the team have been with us for 10, seven, eight years. So we all know each other really well. We’re in our rhythm.
Our strategy is clear. Because we have that continuity in the management team, we don’t flip-flop. Sometimes what I see in our competitors, particularly when they have a changeover in leadership, is the new guy comes in and wants to do it a different way to the old guy, whereas we’re really focused in terms of what our ambition and plan are and we’re constantly in execution mode.
I think we bring intensity to our execution versus our peer group. For me, it’s not about “this year of achieving milestones”. It’s the platform and the foundations that we’ve put in place over the last 15 years that allow us to continue to grow at the rate of knots that we do, which is more difficult the bigger you become.
DZ: What has been your proudest achievement this year? How does this shape your goals and strategies for next year?
DW: It’s difficult to single out one product achievement. I think, as a business, we probably don’t look back and reflect enough. We’re constantly looking forward and trying to mark off what the next objective is.
But one that springs to mind from earlier in the year. Our Elstree programme, which is our securitisation- so how we raise capital in the debt capital markets- recorded the tightest securitisation since 2022. And we were the last firm to print at that kind of level. It really just does show and demonstrate what the institutional investor market thinks of our platform and our business. That’s always a proud moment when you know investors are backing you above your peer group.
The commercial proposition has also been a proud achievement. It is very early days, and I tend not to get carried away with things early on, but the launch into these markets is a significant commitment for our firm. We open a new office, we hire a bunch of people and we deploy enormous amounts of equity and funding into that market. If you’re going to do it, you had better be right.
I think this has been the most seamless product roll-out that our firm has been part of. I attribute that success to the fact that the existing team aren’t doing the product extension off the side of their desk. We’ve brought in a team of specialists, who are supported by the existing executive team, and they’ve been able to run with it, which means that we’ve been able to enter into that market more quickly than we would have anticipated and, also, we’ve enjoyed instant success, rather than it being a slow burn.
But it’s still very early days. We’re not getting complacent. And, as with anything that we do, there will be a few twists and turns in the road. The competitors will respond to what we’re doing, the market will improve its efficiency and, I think, our entering the market will be a good thing for the specialist finance industry and those who originate commercial mortgages.
What can brokers and borrowers expect from West One in the next 12 months and beyond?
DW: At the risk of sounding dull, it’s more of the same from us. We will continue to be highly ambitious, a consistent lender in the marketplace.
What I think you benefit from with West One, and where others might have a slightly different philosophy, is we don’t dip in and out of markets. When we’ve decided that we want to be a participant in a market, we really want to be deeply and meaningfully in it permanently. So I think that introducers will see we continue to have a great appetite to support them and their customers and just continue the journey that we’re on. I don’t think you can be more ambitious or do things differently to what we currently do.
DA: From a commercial perspective, they’ll see the launch of a really compelling product and service proposition. That’s the first thing. They will see a business that will want to tweak and be flexible and agile in the next 12 months so, where we see an opportunity or a gap, we’ll want to fill it. So, really exciting times for commercial.
It might be a little bumpy along the way if it goes as well as we hope it will go, but we will be agile. We will bring out better systems and processes in the next 12 months, but brokers will feel that we’re aligned with the rest of the West One product offering and the service will be what they’re used to.
DW: What brokers are really starting to see from West One is a virtuous circle that is being created across the product suite. We often have customers who acquire land through bridging finance, develop it through our construction finance proposition and then retain it through either BTL mortgages or long-term commercial mortgages or, indeed, potentially even residential mortgages.
So, having that comprehensive product suite allows us to be a one-stop-shop, and we do cover a lot of needs. And I think if you do that, you manage to forge deeper relationships with the broker community. That trust develops because they’re acting with you so frequently across such a product suite that they really understand what your core values are. If we can take the energy and the dynamism that we have within the rest of our business, bearing in mind that the heritage of our lending products comes from bridging finance, then we will be in a really good place to address the commercial market and bring something different to it.
