Phil Hooper: From NatWest to Pluto

The former head of real estate at UK bank NatWest discusses his market outlook following his move into the alternative lending sector.

In January, Phil Hooper swapped working in the banking sector for working in the world of alternative finance.

Phil Hooper Pluto Finance
Phil Hooper

The former head of real estate finance at UK high street bank NatWest was announced as head of lending at Pluto Finance, a London-based specialist lender which was founded in 2010, is part-owned by the UK pension scheme Universities Superannuation Scheme, and predominantly finances residential investors and developers.

In a statement, Justin Faiz, Pluto’s chief executive, said: “With Phil on board, the next 12 months will be pivotal for our five-year growth plan.”

In joining a growing non-bank lending platform, Hooper stepped into a vastly different organisation from where he had spent his career to that point. He joined NatWest, which was subsequently bought by Royal Bank of Scotland, in 1986, joining its property division in 2004 and becoming head of UK residential real estate financing in 2014.

Then, in 2018, he became leader of the real estate division following the departure of predecessor Paul Coates. Hooper took the reins following a period of realignment for the bank, which had come close to collapse during the global financial crisis, and which, under Coates, had vastly reduced its property lending exposure.

Speaking to Real Estate Capital Europe in 2018, Hooper explained his role was to ensure NatWest, as his part of the group was by then renamed, remain a “mainstay” of the lending market.  “We’re comfortable with the size of the business,” he explained. “The strategic ambition is to maintain our position in the market.”

Following his move to Pluto, Hooper explains the time was right for a change. “I’d been at NatWest for a long time and when we emerged from the pandemic, it felt like the right time to look for a new challenge. The book was in a good shape, and we had delivered the medium-term strategy to re-focus our UK-only business.”

The covid-19 pandemic came as lenders of all types had enjoyed several years of favourable market conditions. Hooper says it presented the opportunity to demonstrate how lenders had changed the way they did business since the last big crisis. “The approach during the pandemic was to be supportive to clients and show what we had learned since the GFC,” he says.

When he began looking for a new role, Pluto’s size appealed to Hooper. “Having worked in big organisations, I wanted to work in a smaller business with the ability to be more agile, where I could be more flexible around the terms and structure of transactions.

“I’ve been financing transactions across the residential asset class throughout my career so the decision to join Pluto, [which] specialises in the subsector, made my decision fairly easy.”

While his role at NatWest was to maintain the bank’s market position, growth is very much on the agenda for Pluto. “We plan to grow the platform, to a target of £2 billion (€2.3 billion) in the next three to five years. Robust backing from a range of strong investors, including the largest private pension scheme in the UK with over £80 billion assets under management allow us to deliver that.”

Growth is being targeted at a time when financing market conditions have become challenged by economic uncertainty. However, Hooper argues the supply of financing has held up in the UK. “I thought there would be less debt liquidity available post the mini-budget last year but after the immediate impact lenders appear to be maintaining appetite to support transactions having made suitable adjustments for the shift in the cost of borrowing.”

Flexible approach

The desire to take a more flexible approach to lending was part of the attraction to Pluto, rather than joining another bank, he explains. “Working for a large organisation, you need a broader framework in order to remain consistent across the business and the ability to change quickly is more challenging. Moving to Pluto allows you to be more flexible and really look to be a business partner to customers by creating bespoke financing solutions for them.

“Having been part of the infrastructure at NatWest for most of my career, I felt as though it wouldn’t be right for me to work for another similar sized bank,” he adds.

Hooper believes non-bank lenders will start to grow more market share, as banks stay focused on their core areas of business. “The high street banks have a role, but for a big bank it makes sense to play in mainstream markets. The bigger banks in more challenging times cannot lose sight of the cost of funding.”

Despite tougher lending conditions, Hooper is adamant bank lenders like his previous employer will remain key players in the property financing market.

“Clearly, all big banks are heavily regulated and have a suitable frameworks around how to operate. I felt NatWest had been always open and were willing to look at financing transactions but it is a very competitive landscape and we were often outbid from those lenders which were willing to support higher leverage.

“I was very privileged to have the opportunity to run a business like at NatWest and you certainly learn a lot from working in and then managing a real estate finance business for around 20 years. Those learnings certainly stay with you.”

As refinancing conditions become more challenging, many in the industry have speculated that bank lenders will be less inclined to extend borrowers’ loans at a time when property values are under pressure and interest coverage ratios are strained. Hooper expects banks to demonstrate the collaborative approach they took with borrowers during the covid crisis in the coming months, but expects to see banks take action where necessary.

“Banks will be supportive,” he says. “They will give time to customers to build out strategies and clearly, leverage is generally not as high as it was in aftermath of the GFC. Banks will want to engage quickly and whilst loan-to-value gives an indication where [loans] are from a capital perspective, it is the sustainability of the cashflow that will be important. I would imagine we will start to see some distressed assets coming back to the market in H1. In the more challenged situations, Lenders will be more proactive about taking action.”

Growth plans

At Pluto, Hooper’s initial focus is the residential market, which he has long specialised in. “Residential seems more resilient and will withstand some of the pressures we are seeing,” he argues. “Mortgages is a growth area for many banks but there is a challenge around what customers can afford. At Pluto we will focus on build-to-sell, build-to-rent, student housing.”

However, as Pluto grows its activities, it will also target expansion into the commercial asset classes, Hooper says: “We’re working out what our appetite is.”

Commercial lending opportunities need to be carefully considered across sectors he continues. “In the retail market, a lot of the reset has happened, so if you are coming in with a redesign play now that will be interesting but some dry investment plays will not stack up unless these are at very conservative leverage levels.”

As part of its growth plans, Pluto will increase the size of the loans it writes this year, and is looking to undertake transactions of up to £100 million ticket size in its chosen asset classes.

However, he insists Pluto will not become a “mainstream” lender. “We will focus more on repositioning, construction type finance – initially in the beds sectors,” he says.

Hooper’s move into the alternative lending sector presents him with a new challenge to grow a business, with an initial focus on a sector he knows well, but within an organisation type that provides him with a new approach to the property financing industry.