New funding lines and a fresh approach

Pivot was incorporated in 2012, originally with a focus on bridging loans in London. In the almost 10 years since then, much has changed, from the scope of its lending – offering more complex refurbishment and development loans - to the nature of its funding lines, and the operating model of the business itself.

According to Shahil Kotecha, chief executive officer and principal of Pivot, there have been three main incarnations of the business in that time.

Following its initial focus on bridging and high net worth (HNW) funders, Kotecha joined Pivot in 2015 and set about broadening out its lending remit, making the business more scalable at the same time, including shifting focus towards institutional funding.

When COVID-19 hit, the firm stepped back from new lending, assessed the market, and focused on supporting its existing clients. After a period of reflection – and having secured a £15m investment from Quilam Capital – in January 2021 the third iteration emerged, with institutional funding now fully replacing HNW backers, supporting a focus on larger ticket sized loans.

There are some tenets, however, that have remained since the beginning.

“There’s a vision of being a very approachable but uber professional lender. That's what we’ve tried to do since the beginning. We’ve also always adopted the ethos of using the best capabilities available,  be it technology, data or people.”

Shahil Kotecha, chief executive officer and principal of Pivot

APPROACH AND VALUES

Pivot is now more strongly focused than ever on providing certainty, working collaboratively and demonstrating credibility.

Kotecha says: “I’m sure all the top non-bank lenders would say speed and flexibility are key features of their offering, but I feel those are a given if you work in this market, and you can only go as fast as the transaction warrants. We want to provide certainty.

“We aim to have open communication with all of our stakeholders, and we do a lot of credit analysis up front, getting as much information as possible at the beginning of the process. This can feel daunting but we feel this approach  reduces rework later on in the process. It’s a classic Lean approach and our view is that our end-to-end process time will be the same, if not shorter.”

Collaboration is also part of Pivot’s approach to its funding relationships. Although Kotecha points out that institutional lines can risk being more restrictive when it comes to creativity and entrepreneurialism, this is where choosing the right partner, one which will provide checks and balances but will also get on board when innovation is the right move, is key.

Kotecha explains: “We truly are collaborative with our brokers, borrowers and  network of third parties – whether the deal happens or not.”

This careful, collaborative ethos spreads to other elements of the business, such as its approach to technology, Kotecha explains: “You can have all the data under the sun, but how do you use that to drive better decision-making? We've tried to really hone that recently.

“We use third-party software that gives us all kinds of information, but we’ve also built our own proprietary tools that use data to help us determine liquidity, which we can then use to provide bespoke leverage to each deal.

“The third incarnation of Pivot brings the lessons of the past decade together – and we’ve really thought about where we fit in the market as well. It's about aligning our capabilities as best we can with our offering.

CAPITAL IN A CRISIS

One of the fundamental lessons Kotecha points to from the last year and half is the importance of secure, reliable funding.

“You need to have the right capital behind you in order to weather any kind of storm, whether that’s changing regulation, or wider macroeconomic factors, such as Brexit or COVID-19,” he explains.

“This is why we were very happy to continue our relationship with our existing funders as well as partnering with  Quilam;  it’s a matching of minds – if another serious crisis hits, we are now well equipped to lend through this..” 

The ability to deal with such crises is not just about secure funding, but also past experience, which Kotecha adds is something Pivot has in abundance.

“There's something to be said for having the war wounds,” he continues. “You can have all the theory, but until a particular scenario has happened, you may not know what to do.”

To this end, Kotecha points to the importance of hiring people with diverse areas of expertise with which to bolster the collective knowledge and experience within the business.

FUTURE OF THE BUSINESS

Looking to the future, Kotecha sees the residential market remaining buoyant, while the development sector will face a number of interesting changes, such as an upsurge in post-COVID permitted development (PD) schemes, converting commercial premises into residential.

In the longer-term, this market will likely be shaped by increasing use of air rights, which Kotecha marks as having huge potential to unlock the residential space, while ethical social and governance (ESG) concerns will gather momentum across the market. This will likely tie in with increased use of modern methods of construction (MMC).

“Even now I think for a lot of people ESG is a nice to have, but I believe it will go a lot further,” he adds. “Which lenders are actually looking at the governance part? How are developers governing their build, what procedures have they got in place? We're already starting to see a lot more emphasis, understanding and assessment of those methods.

“For the lending market, the minute one says the capital is for an ESG loan, the cost of that money is cheaper which will precipitate into cheaper onward lending. That will naturally force developers  to think about ESG on their schemes.”  

Against the backdrop of the strong residential market, Pivot is now lending up to 75% loan-to-value (LTV) on bridging loans and 70% loan-to-gross-development-value (LTGDV) on its development facilities.

In addition, the business plans to further enhance its use of data internally, as well as using technology to ease processes and increase accessibility, such as through portals and apps.

“We’ve always tried to use technology, it’s just that there are more readily available prop tech solutions now available that fit our vision,” says Kotecha.

At present, Pivot has no concrete plans to grow its team, instead taking the approach that it will add people as and when needed. This fits with what Kotecha describes as a nimble, flat structure with minimal hierarchy, helping to create its collaborative culture.

Finally, looking to the future, Kotecha says there are a few messages it is important to get out to the market.

“A lot of people know us as development finance specialists,” he explains. “The first thing is, we’re more than that. We look at residential and commercial bridges; portfolio refinances and even look at planning risk, for example.”

Kotecha concludes: “Why might you want to work with us? There’s the collaboration and certainty that we’ve discussed, but also you will get a very professional output from us. It’s shiny, well put together – that's how we are, we take pride in how we present our output.

“We have one voice at Pivot and we get things right, but that doesn’t mean we’re stuffy and unapproachable, it’s very easy to work with us. We enjoy working together for the right output, we’re keen to lend, and open to all kinds of innovative projects.”  

Thank you Mortgage Introducer for the Spotlight Editorial feature, July 2021.