WISE WORDS - COLIN SANDERS - BRIDGING INTRODUCER INTERVIEW - DECEMBER 2022.
06.12.22
Tuscan Capital's Colin Sanders is preparing to share some gems of wisdom from his long career for a new book, as he tells Simon Meadows.
Having been in business for nearly forty years, Colin Sanders, CEO of Tuscan Capital, has a plethora of experience in financial services, and, as an articulate man, he has plenty to say about the market. But when an industry colleague asked him what, from his perspective now, he would tell his 21-year-old self, he was stumped.
"I think it's a clever question, and it's an interesting one," said Sanders. "But when he asked me that question, it took me aback, and I said to him, 'It's such a big question. I'm going to go back and do some notes.' And what I've ended up doing, I've actually written my memoir."
The resulting book from Sanders, who is the majority shareholder of the specialist short-term property finance provider, is due to be published in Q1 2023. Entitled How the hell did I get here?, it is based around "12 nuggets of wisdom" he has learned over his career.
So, what might they be?
"I'm hesitant to give you one of my twelve nuggets of wisdom," Sanders laughed. When pressed, he relented. "I've been in this industry for a long time," he shared. "I have crossed paths with lots of people, but things change, people change positions. And in an industry like ours, what's important is to treat everyone with respect and try to treat everyone the same, no matter where they are in the pecking order."
While today he heads up Tuscan Capital, Sanders' earlier career included being a founding director of iGroup, CEO of GE Money Home Lending and Money Partners, and, more recently, the founder of Omni Capital and Fortwell Capital.
Headquartered in Victoria in London, with regional offices in Birmingham and Manchester, Tuscan Capital offers a range of services, from bridging loans and commercial bridging, to HMO, auction and refurbishment funding, and property development. But of all the complexities involved in launching a business, settling on a name for the firm's launch in 2018 proved among the trickiest.
“When you set up a new business these days, everything’s gone, everything’s been taken”, Sanders admitted. “And so, when you look for a domain name that matches the Companies House availabilities, it’s virtually impossible. Tuscany is an area my wife and I love, and Tuscan was available. So Tuscan Capital it was.” He added, with a smile, “It’s quite funny, because every-one wants to hear a more poignant story, but that’s the truth.”
Tuscan Capital’s experienced team of fourteen handles anywhere between 100 and 150 enquiries a month, Sanders explained. “We can give a lot of TLC to our deals,” he remarked. “We’re a business that has grown year on year, over the last five years, even through the pandemic.” How would he define the culture and its approach?
“We aren’t a challenger bank, and we aren’t a high-street bank,” Sanders said. “So we have to in in the niches, and we have to win by offering better service to our brokers. The vast majority of our deals are introduced to us through brokers and independent financial advisers. So for us to compete and have a place on a broker’s panel, we need to operate effectively and be proactive. And we’re able to look at ways of coming up with solutions on deals and finding ways of structuring deals that don’t fit the template.
He elaborated, “We have a lot of high-net-worth individuals who have good property portfolios. The products that we tend to offer to those types of customers tend to be for capital-raising purposes. They’re effectively looking to raise capital against their existing portfolio to do something else, whether that’s acquiring or refurbishing a property.
“So buy-to-let landlords may have some funding that they used to maybe do a big conversion of a house into multiple units, and when their development finance comes to an end, they need to restructure. Finance offerings are quite often very expensive if you run over the term. So, in order to spare those expenses, Tuscan often provides a development exit loan to repay the development finance, and it gives them [landlords] time to either sell the units or get the revenues up so that they can prove their income from the asset and get a refinance deal. It’s a firebreak, if you like, and it’s been very popular in the last 12 months, and we see that continuing in the next year.”
Tuscan Capital has actively tried to speed up the process of arranging finance.
“2021 was a really buoyant market, as we had a bit of a bounce-back after the lockdowns,” Sanders said. “We were incredibly busy and grew our loan book quite substantially. We came into 2022 hoping that it would continue, and I would say that early 2022 became slightly sticky. We found that a lot of transactions were taking a long time to go through. Valuers were incredibly busy, and we couldn’t get them out in time to get inspections done. We also found that in the legal process. Land Registry had slowed down and title registration was massively behind, and the lawyers were getting choked up by their workload.
“Our customers were getting incredibly frustrated. So that was why, in the middle of the year, we launched our Fast Track product. It involves using what we call an AVM, which is an automated valuation model, so rather than relying on a full ARICS surveyor’s valuation, we would use digital valuer Hometrack’s property listings data to assess the valuation of a property, and lend based on that.”
Sanders continued, “We are one of the very few bridging providers that has relied on an AVM, but it has improved our turnaround time significantly. It takes potentially six weeks out of the process, if that’s how long a valuer takes to get there. The other part of Fast Track that we introduced was title insurance and title indemnity, which meant that we didn’t have to do quite such a deep dive with our due diligence on the legal aspects of a transaction. And we also delayered and decluttered a lot of the credit requests that we were requiring from customers.
“It has helped massively. There are some deals where we cannot do the Fast Track, and that’s where they’re either too complex or the borrowing leverage is very high- but where it’s 70 percent loan-to-value or below, we can. In fact, we’ve done some case studies since introducing this, with turnaround times of inside two weeks, which is a testament to the changes that we’ve made. And it’s a welcome change for many of our introducers.”
Sanders acknowledge that, despite the benefits that Tuscan Capital was offering, the market faced challengers.
“Interest rates and the cost of living have been going up, and the cost of development,” he noted. “So if you’re a developer or a property investor, and you’re looking to convert or enhance a property, the cost plans and your cost of borrowing are significantly on the increase.
“My prediction is that the property prices are going to come under pressure. Now, I don’t suggest or predict that that’s going to be dramatic. I think it will be supply-and-demand driven. In areas where there’s very little supply, I think properties will still hold on to their value, and certain pockets of the country will still have a pretty healthy property market. But in areas where there isn’t a great deal of demand and there’s an oversupply, I think we could see some significant reduction in value.”
Sanders said, “The one thing that we’re already seeing is that there are two types of buy-to-let landlord at the moment. There’s the buy-to-let- landlord who is very highly leveraged- in other words, has got large mortgages against their portfolio. Those landlords will find it incredibly difficult to make any real money out of their buy-to-let portfolios. If they’re highly leveraged, the cost of borrowing is likely to have gone up. If they’re on fixed-rate buy-to-let mortgages, they might not be feeling the pinch yet – but as they come off their fixed rates, they absolutely will; there’ll be a significant payment shock. And with the fact that, over the years, the government has been getting rid of any of the tax breaks or the ability to offset interest costs, effectively it means that your buy-to-let portfolios will be really struggling to make any net margin at all, and you are going to have to sell to get rid of some of that debt. “If you’re a buy-to-let investor or a property professional with large portfolios but with very low borrowings – and, thankfully, lots of our customers are – the chances are you’ll still be able to make margins and you’ll still be profitable; it’s those guys who have the opportunities. So it’s polarised. This is how I see the 2023 buy-to-let market.”
Sanders further advised “If you’re not wanting to lock yourself into a five-year deal, a solution could be to just take a bridging finance facility to basically see where the market is over the next 12 months before you make a long-term decision. With a bridge, you do not have any early repayment charges [ERCs], and you’re free to come and go as you want without a penalty, whereas if you’re locking yourself into a five-year fixed, you can have some fairly barbed exit fees, especially over the first one to three years.
“Inevitably there are going to be some property bargains to be picked up by auction or quick sales, and that’s likely to be where bridging comes into its own. If I were a buy-to-let investor taking short-term money, I’d want it to be on a variable rate rather than paying a higher-cost fixed that based baked-in what’s likely to happen in 2023-24. So we have introduced a variable, Bank of England base-rate tracker. It’s been very popular.”
How would Sanders advise brokers to navigate the current economic storm?
“My advice would be, don’t hurry to lock everyone into a long-term solution, because that might by costly. Don’t be frightened to find short-term fixes. The market is very volatile, and things could change over the next 18 months or so quite radically. Don’t place a deal and then sit back and wash your hands of it – we see a lot of brokers who do that. Stay in touch with customers to see what’s changed within their bigger picture.”
Clearly, the CEO of Tuscan Capital relishes his current role – and could potentially add quite a few chapters yet to the story of his career.
“I’ve been around the block in corporate roles, running big businesses,” said Sanders thoughtfully. “At my time of life I’m now enjoying transactional stuff much more – looking at deals and actually being in touch with customers and their needs and trying to adapt our products to them. I enjoy the day-to-day buzz of it, and I wouldn’t be without it. I enjoy what I do”.
Read the full interview in the December edition of Bridging Introducer Magazine.
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