Urban Exposure Group chief executive Randeesh Sandhu’s relaxed exterior belies serious ambition. Ambition that has seen Sandhu take the business, which he co-founded with his wife, Daljit, and Adrian Mediratta, from an office at home to a proposed new berth on the London Stock Exchange.
And the group’s residential development lending business, which is on track to be listed this month, only really emerged five years ago from what was originally founded as a residential development company in 2002.
Speaking to Estates Gazette ahead of a three-week roadshow for the £500m Urban Exposure Real Estate IPO, the 37-year-old delivers refreshingly honest answers to questions such as “Why did you start Urban Exposure?” and “why real estate?” with ripostes such as, “It kind of happened by accident”, and “I don’t know”.
What is clear is that after a short career as an actuary and two years with Deutsche Bank’s London credit derivatives desk, the Leeds native and Warwick University maths graduate (MORSE, for those in the know) wanted more, so in 2002 founded UE Group “with no business plan but grand ideas”.
It is also clear that the introduction of property veteran Will McKee around this time was formative, and his early lessons remain a strong influence.
Sandhu says: “Guided by Will, as developers we would never undertake a property development with less than a 20% margin, and ideally you want 25%. Now as lenders we won’t lend on a project with less than a 20% margin.”
This meant that by 2004 UE Group’s burgeoning development business was driven out of London to the regions and by 2004 had a residential portfolio that spanned the Czech Republic, Turkey and Crete.
For Sandhu it was a “natural step” to move into debt. “When you start looking at property development and how it is funded and private equity funding and debt funding and who is taking on risk and who is getting returns, you realise lenders are making more money and taking fewer risks, and that’s want we wanted to do.”
With backing from Investec, the group launched its first mortgage lending business in 2005, which originated, underwrote and warehoused loans on the bank’s balance sheet before securitising them. After three securitisations totalling £1.6bn, the 2007 credit crisis hit and the tie-up with Investec came to an end. What followed was two tough years, but for Sandhu this was because after almost dying of pancreatitis he was forced to take 18 months away from the now solely development business, watching it shrink from 87 employees to 10 by 2009.
Sandhu’s return that year came as the group’s developments abroad were completing and money was deployed back to London, with the intention of starting to develop in the capital. Again, too much competition for sites prompted the group to evolve and it launched what was originally a balance sheet mezzanine provider which has grown into today’s business, providing senior, stretch senior and mezzanine loans. Since 2009 the group has lent on schemes in the sub-£1,000 per sq ft bracket with a gross development value of £1.3bn.
E&Y’s Rishi Bhuchar has been instrumental to the now five-strong partnership’s growth and fundraising strategy, first introducing it to partners including LaSalle Investment Management and Starwood and advising on the decision to go public.
The launch of UERE as the sole investment vehicle for the group, which has £850m of deals in hand and a further £6.9bn pipeline, set it in good stead to fulfil Sandhu’s ambition to enter the FTSE 100 and build up a £3bn loan book within five years.
The challenge of running a listed vehicle – one that has already attracted a £75m commitment from cornerstone US investor EJF Capital – does not faze Sandhu.
He points to the “great board we have put together”, which includes financial services veteran Malcolm La May as independent non-executive chairman, and a cohort of experienced non-executive directors.
He says: “It is a lot riskier in terms of set-up costs but that is not the point. Lending is first and foremost about not losing money – it has to be.”
bridget.oconnell@estatesgazette.com
