The Rise of Leisure …
When we first entered the bridging industry in early 2013 the first thing we noticed was the number of other bridging lenders. It was a seriously crowded market.
We needed to offer something new and, fortunately, our leisure finance product fitted the bill. It isn’t (and never has been) the only lending we do – in fact these days most of our loan book isn’t leisure-related – but it was a definite USP and we raved about it as loudly as possible.
The broker community liked the idea of a lender who was comfortable with an unfashionable sector and we’ve built a name around the leisure concept. We even call ourselves the Leisure Specialists on our marketing literature. Bringing something new to a crowded market was probably what won us the Best Bridging Newcomer Award last year.
Therefore, you could forgive us for having somewhat mixed feelings about recent industry commentary suggesting leisure is vogue once more.
In February, specialist valuers Pinders released their e-newsletter focussing on London and the Home Counties. Pinderscited the Restaurant guide Hardens which had reported a record number of new London restaurant openings in 2014. New openings totalled 148. The same guide reported 47 closures, the lowest since 2000.
Pinders also reported recent and intended expansions by a several key players: Hotel du Vin will open its first London hotel having acquired Cannizaro House near Wimbledon Common. Jimmy’s World Buffet has opened in Brighton Marina. Whitstable has a new boutique hotel, The Crescent Turner. JD Wetherspoon will open The Angel Vaults in Hitchin in March having spent £1.8m developing the site.
However, the most interesting observation made by Pinders involved the sales growth of 10.7% in coffee shops, which is now a market estimated at 18,832 outlets (Allegra Strategies). Its slightly surprising because actual coffee consumption has reduced since 2006; but of course coffee shops are now hubs for socialising and conducting business and they sell a lot more than coffee.
Pinders report that the growth has even spilled over into the non-specialist sector, which includes pubs, fast food outlets, retail stores, garden centres and petrol stations. This sector has actually outpaced branded chains with growth of 14.5% in the last year, to reach over 7,000 establishments with a strong coffee offer. In fact, the second biggest seller of cups of coffee in 2014 was McDonalds (after Costa).
All this is of course great for the sector, but it shouldn’t be great news for Ortus because lenders are being attracted back into the sector. Deals which might have needed bridging 12 months ago are now finding a home more quickly with longer-term lenders. More competition is surely bad news for a relatively small lender like Ortus. However, we are not crying into our pints (or cappuccinos) quite yet.
A key part of bridging (you might say the most important part) is repayment and a healthy lending market is vital for this. We like supporting clients during the higher-risk early stages of their businesses and then seeing them refinance onto a great high street product. It means clients are the biggest winners and this is what we want to see.
A healthy sector also attracts new operators, and this is where Ortus can often help. Very few lenders will take a view on a leisure business in its early high-risk stages; and very few lenders are happy to provide finance in Scotland and Northern Ireland.
Therefore, Ortus continues to fill an important gap. And as the sector gets bigger, the gap gets bigger … and our opportunities increase. It looks like we’re benefiting from making a good call on a sector which, despite being unfashionable as recently as last year, is increasingly seen as something worth betting on.