Paragon buys Titlestone developer and loan book in £274m deal with Oaktree Capital Management

Challenger bank Paragon today announced the purchase of £48m residential developer Titlestone and a £226m loan book from Oaktree Capital Management.

Paragon, which offers mortgage and business lending, said the moves are part of a strategy to diversify into specialist lending markets.

Titlestone advanced £274m in loans to small and medium-sized developers during the year to June 2018, Paragon said, with a pipeline over just under £250m.

The bank, which enjoys a relatively high capital ratio, is targeting property development financing amid a long-running shortage of housing in the UK which is expected to sustain the property market in spite of concerns over Brexit effects.

Read more: Paragon confirms it’s in talks to acquire housebuilders’ lender Titlestone

Analysts welcomed the move. Ian Gordon, banks analyst at Investec, said it was a “superb” transaction which will boost margins and the cost-to-income ratio.

Paragon’s funding weight and its ability to be keener on pricing given its larger size could enhance Titlestone’s business, said Toni Dang and Shamoli Ravishanker, analysts at Barclays.

Nigel Terrington, Paragon chief executive, said: “This acquisition demonstrates our continued progress in diversifying the group’s income streams into specialist lending markets. The UK development finance market represents an excellent long-term opportunity and Titlestone will enable us to accelerate our growth in this area.

“The management team have an outstanding track record and the business is a strong cultural and operational fit with our existing development finance business and the wider group.”

Read more: Challenger Paragon boosts mortgage lending despite buy-to-let crackdown