Who are you in a nutshell?
David Lutton, Chief Operating Officer of Mathon responsible for managing the day to day operations of the company. Mathon is one of the UK’s leading asset-based lenders in the commercial property sector. We offer short-term finance that allows property developers and investors to make rapid acquisitions of property and land assets or to redevelop or refinance existing properties. All of our lending is secured against property assets in the UK or Ireland.
What is your background and what do you feel made you suitable for your current role?
After gaining a first class honours in Politics from Strathclyde University and an MSc in Public Relations from the University of Stirling, I went on to train with a specialist political communication consultancy in London where I gained first hand experience using planning and communications to achieve business objectives.
I then set up my own communications and marketing consultancy. Here, I gained valuable experience of international communications and crisis management whilst managing the global communications and investor relations of a US listed Biotechnology Company.
Soon after, I worked as Operations Director of a start up company exploiting a portfolio of intellectual property. In this role, I took an overview across every aspect of the business process from finance and human resource to marketing and delivery. My major contribution was developing the systems and operating process which enabled the company to successfully compete in a demanding market, attracting and retaining a client base of ‘household-name’ UK brands.
My career has allowed me to build up extensive experience in operational management, marketing and corporate communications within the property sector.
Who do you think is to blame for the recent problems in the mortgage market?
I don’t think one body is solely responsible for the problems that have recently emerged in the mortgage sector but rather a number of factors have contributed to its current state. For one thing, lending in 2007 significantly exceeded the levels that the regulators were setting; this was undertaken by the use of cleverly devised methods which involved other lenders to lend on the bank’s behalf.
Overall, money was lent on a long term basis but depended on the bank’s ability to borrow it week by week. Sophisticated yet complicated financial instruments obscuring the risks associated with such behaviour also failed to help the situation from worsening.
What is the history of your company?
Established in 2004, Mathon’s name was inspired by lending principles which date back to the ancient city of Babylon, where Mathon was the city’s gold lender. Mathon was the world’s first asset based lender; he lent gold to the citizens of Babylon in exchange for a ‘ticket’ which secured the loan over a property asset. The tickets where kept in a chest until the loan was repaid.
Mathon operates in the commercial short-term finance sector but does not lend into the residential, sometimes referred to as retail bridging finance sector, where the property offered as collateral is the client’s primary residence. All loans made by Mathon are secured over property assets in the UK or Ireland.
The Group is headquartered in Glasgow and operates throughout the UK. It has also recently commenced marketing its services in Ireland.
What is your company’s philosophy?
Mathon works to have a diverse client base, encompassing limited companies, family businesses, partnerships and private individuals.
We work to serve our clients. Robust client relationships demonstrate our high level of customer service and flexibility to provide rapid lending decisions. We have seen strong growth in our loan portfolio and have built a reputation for providing short-term finance solutions where other lenders have fallen down.
What advice would you give to intermediaries looking to enter the market?
The growth of commercial bridging is set to continue in 2008 but the role of the professional intermediary in a tighter credit environment will become even more critical. Brokers need to ensure that they have sufficient knowledge of the commercial finance market to match their client’s needs with that of the lender. This is not always easy in the commercial sector.
Commercial deals tend to be larger and considerably more complicated. They require a lot more work in putting the proposal together to a lender’s satisfaction.
Commercial property deals involve business plans, accounts and a significantly more complex valuation and legal conveyance process. Serious players in the sector need to make the effort to learn and understand the special market conditions as well as the valuation/conveyance idiosyncrasies of commercial property transactions.
The commercial finance sector does not have standardised products. Given the potential in the sector inevitably the number of companies entering the market has also grown. There are plenty of new entrants and many seem to come and disappear after an initial flurry of PR and advertising. The sheer number of lenders can be confusing and this can be particularly challenging to residential brokers used to a more bespoke sourcing system.
How high would you say intermediary confidence is in the current commercial market?
There are many reasons for intermediary confidence to be optimistic looking into 2008. There has been steady growth in the commercial market for the past 18 months with all signs pointing to further growth in the upcoming year. The credit crunch is significantly weakening residential mortgages and as such, commercial property becomes a more attractive investment to investors offering significant returns over the longer term.
2007 saw a substantial increase in incumbent landlords and investors branching out from previous successful buy-to-let transactions and dabbling in commercial property to add to their portfolio. This was to exploit the additional security and greater appreciation of capital the tenants on long term leases were offering.
In uncertain and erratic market conditions, bridging finance has customarily come out winning. In an economy where credit is harder to obtain, there has never been a more important time for bridging finance to be undertaken whilst the long term mortgage is being finalised.
Intermediaries trying to meet their clients’ needs for short-term finance are likely to do well during 2008 – irrespective of the economic backdrop.
Does the market need more brokers in it – if so how can the industry attract more?
Essentially, the majority of brokers in today’s market place have a residential and buy-to-let background and thus there is a need for the industry to attract more commercially focused intermediaries especially in light of the growth the market has seen. The industry needs as many brokers as possible who are committed to providing excellent all round services to the client.
The nature of the commercial market at present suggests that now would be a good time for brokers to take their first steps into the sector. With the stable economy, business people will always need commercial premises from which to trade, and investors will be seeking better returns on their money and opportunities to make capital gains.
Where do you think the market will be in 2010?
Commercial bridging finance is an area that saw huge growth in 2007. A recent survey found over half of businesses involved in the sector had experienced growth in excess of 20 per cent. Bridging, or short term finance as it is now often referred, is an established feature of the property funding market without which many property deals would simply not get off the ground.
This growth has been driven by a favourable interest rate environment and underpinned by strong economic growth. The outlook for the bridging market is bright with gross advances in the sector expected to see rapid growth from £2.5 billion in 2005 to £5.6 billion in 2010. In the commercial and residential property sectors, values have been rising for the last five years with billions of pounds pouring into offices, shops and industrial property. Mathon’s findings from our recent objective research survey found that overall lending on commercial property grew by almost 20 per cent in 2006 hitting an all time high of £85.7 billion. Development is also on the up and now accounts for 16 per cent of outstanding lending last year, up from 9 per cent in 2003. Of this figure £16 billion was for commercial and £17 billion for residential schemes.
While the market may have recently suffered various price falls, I believe we can still be very optimistic for 2010.
