Paragon Development Finance has launched a stabilisation loan facility for clients developing Purpose Built Student Accommodation (PBSA) schemes. We speak to Senior Relationship Director Simon Dekker about this extension to the product suite to further support developers and operators in the PBSA marketplace.

Simon, can you talk to us about the new stabilisation product?

We have recently added stabilisation financing to our PBSA offering, which means that alongside our residential development offering we can now finance the entire lifecycle of a PBSA scheme.

At present we can support our clients with the acquisition of a site for which they are looking to obtain planning for a PBSA scheme. Once that is in place we can then support the development of that site up to practical completion and its opening to the student market. 

Now we have the ability to extend that support during the first 18 months of its operation.  

This provides a breathing space for the scheme to be launched and operated prior to any sale or refinance of the trading property.  This period allows time for the scheme to be operated through one full academic year and launched into the second year, and thus its stabilised performance. 

How does this benefit the PBSA developer?

The addition of the stabilisation facility supports our client through the entire lifecycle of identifying and acquiring the site, obtaining planning, the development and operational launch of the scheme and the stabilisation of its trading performance.

Our clients therefore have the knowledge that they have one funder who understands the different risks and opportunities inherent in each stage of the scheme and has the financial wherewithal to provide funding to support their requirements.

Our ability to support clients through the pre-planning process for both PBSA and residential developments is rare in itself.  This extension of our funding to include this stabilisation period provides, arguably, a unique level of support to those clients operating in the PBSA market place.

For the our clients it can remove the significant cost and time in finding three separate specialist funding sources for the different stages of their PBSA development requirements.

Tell us about the deals you have completed which benefit from the stabilisation facility?

In the first quarter of 2022 we have completed a development and a stabilisation facility for our longstanding client, Study Inn, with a £22.6 million development finance facility to support its new state-of-the-art 270-bed PBSA scheme in Nottingham

We have similarly been able to complete a development and stabilisation facility for student operator Urbanite for the acquisition and upgrade of a 450-bed PBSA scheme in Leeds.

What are your plans for the PBSA sector?

The PBSA sector has shown huge growth over the past 20 years and increasing student numbers in the UK means that demand continues to outstrip supply in the towns and cities across the UK.

Whilst covid has changed the experience for many students, it has perhaps underscored the demand for quality accommodation even more so than before.  PBSA is a constantly evolving sector which sees developers and operators continually upgrading their offering to meet the demands of their student clients.

The majority of schemes in build at present will include a mix of studio and cluster rooms to meet the mix in demand but also a wide range of ancillary facilities such as coffee shops, meeting spaces, cinemas, games rooms and spas, along with teaching and training facilities.

Our immediate aim is to support the sector with up to £250million of debt funding.

Do you think PBSA will displace traditional student housing?

With over 2.5 million students in the UK there is little likelihood of the PBSA offering replacing more traditional student housing.  Our view is that it will both complement what is available at present, as well as increasing the supply and variety available.  There will always be a demand for on campus university accommodation, as well as the shared private housing option that is so much a part of the student experience.

With the continued attraction of UK universities both domestically and overseas the demand for a university education is likely to continue.  The continued expansion of the PBSA market will be a key part of providing the support that those students need as part of that experience.  Paragon Development Finance is pleased to be able to play a part in that support.

Contact Simon Dekker on LinkedIn