Luke Madden, managing director of the Wellesley Group, explains how Wellesley’s coronavirus response is all about trust…
In times of crisis, there is nothing more important than trust. Covid-19 has put this trust to the test across the economy: we trust our key workers to keep us safe, our government to keep us informed, and our finance companies to safeguard our investments and to assist borrowers in managing the crisis.
Alternative lender Wellesley has spent years building up trust among its customer base. It has done this by listening to investor concerns and borrower requests, by making changes to the platform where appropriate, by conducting stress tests, and by investing in its relationships.
“You always try to be prepared for every eventuality as far as possible,” says Luke Madden, managing director of the Wellesley Group.
“Last year we did an independent stress test on our loanbook to see what the results would be – and the results were very pleasing. That ratified our lending strategy and informed some of our decision making going forward.
“Trust is clearly very important in any business, and more so with investments and lending.
“As part of this, our investors will want to know how we’re dealing with our borrowers and that relationship plays a very big part.”
Like all property-focused lenders, Wellesley has had to contend with the temporary closure of a number of construction sites. Due to social distancing rules, progress is slower on those sites which have remained open. Furthermore, some of the platform’s completed projects which would normally be in the sales process in the open market are seeing delays.
Notwithstanding this, many have pre-sales agreed which means that the completion transactions are not inhibited.
“We’ve agreed to work with our borrowers where circumstances dictate that some of their output may be reduced so that they can adhere to social distancing measures,” explains Madden.
“They may not have as many people on site or if they are on site, they’re working differently than what they usually would be at this stage.
“We will look to manage the loans for the longer term which requires that we are fair and understanding with our borrowers, however at the same time ensuring that our investors’ interests are best served.”
Wellesley has already minimised the potential harm to investors by maintaining relatively low loan-to-values on its properties. This creates a “reasonably sized buffer”, Madden says.
“Looking to the future we will have to take a long-term view because there will be some short-term volatility,” he adds. “Some reports have predicted a fall in house prices in 2020 but we are hopeful that they will bounce back in 2021.”
The challenge for Wellesley is to maintain the trust of its users even as this short-term uncertainty continues. “What we’re trying to do is take the appropriate measures to safeguard the interests of all our investors not just today but over the whole investment term,” adds Madden. “And that’s built on having strong, transparent relationships with both investors and borrowers.”