Madeleine McDougall’s first career choice was to be an astronaut. It was only after the new head of commercial real estate at Lloyds Bank was told she lacked the requisite 20:20 vision to navigate a spaceship that she turned to property on a friend’s recommendation.
Starting her career at Landsec, she moved into banking during the boom years of the 2000s and cut her teeth in finance, mastering large European deals at Eurohypo with now well-known industry figures Peter Denton (group chief financial officer of the Hyde Group), Hugh Fraser (head of capital markets at M7 Real Estate), Mike Acratopulo (head of origination for Wells Fargo’s London commercial real estate team) and Max Sinclair (head of UK commercial real estate at Wells Fargo). Senior roles at WestImmo and Deutsche Pfandbriefbank followed before she joined Lloyds in 2014.
“It was amazing for my career, given that we were looking at a significant amount of deal volume,” she says of the pre-crisis years.
“It felt like for every year I worked, I worked two years. Long hours, interesting work, some pretty large-scale UK and European transactions. Part of it was work hard, play hard and part of it was just more being at the start of my career and being very ambitious.”
Ten years ago, no banks were doing that well enough. It would take them three days to be able to tell anyone what their risk was on that basis. Now we can do it in 10 minutes.
Now McDougall is in control of one of the UK’s largest commercial property loan books, having taken over the role of head of commercial real estate at Lloyds from John Feeney in August. He was appointed head of global corporates at Lloyds earlier this year.
The real estate team agreed £8.6bn of new funding last year, and McDougall thinks we can expect similar volumes this year.
“Last year the transaction volumes in the whole market were just under £50bn,” she says. “This year, it appears that we will exceed that slightly, and I would say we feel equally busy now as we did last year, so I’ll be surprised if it is sizeably different.”
Lloyds merged the mid-market and global corporates client base together three years ago so the 60-person team now covers anything from around £6m to jumbo deals, although the majority of their loans are up to £50m.
McDougall says there is no particular sector that Lloyds would shy away from at the moment.
“It’s very deal-specific, client-specific, so there’s no one sector that has strengths over and above the other sectors.”
The bank makes three to five-year loans, so while it monitors the impact of how the changing ways in which we live and work are impacting on the different sectors, it is not “lending 10 years into the future when things will change phenomenally”, McDougall points out.
“We are lending in a period where we get churn on our books so we can see these trends happening and adapt accordingly.”
One significant change she has observed in banks’ lending practices since the financial crisis has been improved use of data to de-risk portfolios.
“Ten years ago, we would look at a huge number of transactions, but at no stage were we actually stress-testing it by gathering that data,” she says.
“And whether that’s on the origination side or the credit side, we now have much more sophisticated systems that allow us to say, if there’s a retailer that’s under some stress, let’s go in and check exactly which deals we’ve got that retailer in, what portfolios they’re in, how much exposure we have to that.
“Ten years ago, no banks were doing that well enough. It would take them three days to be able to tell anyone what their risk was on that basis. Now we can do it in 10 minutes.”
Another change has been the rise in alternative lenders as the traditional lenders have become more regulated. Does she find the competition a challenge?
“We see it as a real positive that there’s a big variation in the lender place in the market.
“So what we’ve found is that although we will compete with the alternative lenders, we will also compete with the traditional European lenders, but each of us has our own strategy, which means there’s plenty of business to go around and it’s very rare that we’re always competing against the same lender.”
We are still a significant balance sheet lender, but we are savvier about the way we use our capital and how we allocate that capital.
Previously Lloyds’ head of institutional clients, McDougall was part of the team that drove Feeney’s “origination syndication” model, which saw Lloyds diversify into the syndication space. Of the £8.6bn transacted last year, £1.5bn was distributed.
“I think it is a bit of a misnomer that that’s all we did – it’s become the headline.” McDougall says of the bank’s syndication drive.
“We are still a significant balance sheet lender, but we are savvier about the way we use our capital and how we allocate that capital.”
She adds: “We had a huge growth area in that space because we weren’t particularly doing it as well as we could have done before, and we need to continue to ensure that we have that string to our bow, but that’s not all we do at Lloyds.”
McDougall is committed to continuing to innovate through her leadership. “To stay relevant, we constantly have to innovate,” she says.
The bank’s latest focus is around big data. “One in four transactions goes through a Lloyds Bank account in the UK, so we are helping some of our clients understand the demographic spend,” she says.
“For example, if they own a shopping centre, which tenants work best together? What is the link spend? So if they spend a certain amount in New Look, they are more likely to spend more in another alternative retailer. I think a lot of the landlords think they know what the link spend is but, actually, this is a much more precise tool in allowing them to see it. So, we are running pilots with some of our clients to help them better understand that demographic spend.”
Lloyds has also started working with sister company Scottish Widows to provide longer-term financing at 10-20 years.
“A lot of our clients are long-term investors in the real estate world so it’s a perfect fit for them,” says McDougall. “Sometimes we even team up with them so we provide the development financing and they provide the take-out long-term financing at the end of it.”
However, McDougall is most proud of Lloyds’ green lending initiative – the bank’s pledge made in March 2016 to deploy £1bn of financing at a discounted margin to clients who commit to improving the energy efficiency of their buildings.
“It’s not just about building brand-spanking new shiny buildings,” McDougall says. “It’s about taking some of the older stock and making sure it’s fit for purpose.
“And the reason it’s so important is 40% of all carbon output comes from the built environment… so, we can sign up to the Paris Agreement, but actually it’s the industry that needs to help change this, not just the politicians.”
It all sounds positive. What could go wrong? “The interesting thing about cycles is that each time we think it’s going to be different and it’s not,” she says. “But you never quite know when the cycle’s going to end and when it isn’t.
“We all know it’s a cyclical market, we have tried to stop it being cyclical, we are much more heavily regulated now to try and keep that consistency. So it’s about managing for that when it happens and we are constantly stress-testing our book to make sure we are in a good place. And, as I say, our average LTV is fairly low.
“We did some stress analysis when Brexit occurred and our book was still very healthy. We are one of the best capitalised banks out there so if it does come – when it comes – I think we are in a fairly good place to be able to manage that.”
Looking back at her chance move into property, she says she has no regrets.
“I didn’t really know what I wanted to do when I left university and I had a friend who went into real estate who said: ‘You should definitely come into this market – the people are very friendly, it’s a very open market, it’s very intellectual, but it’s also got that personality’ and I’ve found that throughout my career.”
“The clients I’ve dealt with, the colleagues I’ve dealt with, we are all one very close-knit family actually, and that’s been very important.”
She still regularly meets up with her former colleagues from Eurohypo and Landsec – if she doesn’t bump into them directly during transactions.
As for any changes she would like to see in the wider industry, greater diversity is among them.
In addition to mentoring women, she tries to encourage the men in her team to take paternity leave and flexible working so there is a “change of mindset” in the workplace.
“There’s still quite a long way to go, I have to admit,” she says. “We are definitely not at a 50:50 ratio. I think we are very good at starting out that way, so a lot of our talent in the pipeline is 50:50, but as we get more senior it is hard to ensure that we are at that level, but Lloyds is working very hard [to improve that].”
She has seen some improvement. “Put it this way, there are fewer meetings I turn up to where I’m the only woman in the room, thank goodness. I remember doing that in 2007 and there was a room full of – and I counted – 35 people, and I was the only woman in the room.” Today, she’s more likely to be the most influential person in the room.
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