Key Figures:
- Client: UK National and Resident
- Property type: Vacant Hotel with Planning to Convert to 108-Bed Student Accommodation
- Property Value: £11,100,000
- Loan Amount: £5,152,000
- LTV: 46%
- Interest rate: 0.79% pcm Fixed, 6 months Term
While investing in student accommodation can be a lucrative, long-term investment opportunity, raising debt to finance this type of investment can be complex. Lenders like to lend against mainstream real estate assets, and as student accommodation can be less liquid than other parts of the property market, not all lenders offer student accommodation finance. Those that do operate in the space often finance certain types of property in exclusivity, preferring smaller properties like houses converted into student lets rather than large properties set up for relatively significant numbers of student tenants.
In this case, our client approached us because they had purchased a vacant hotel in a Scottish city centre with a large university that was ideal for converting into student accommodation, which is in high demand. The client had got planning to convert and was looking for a funding facility to repay the debt they had taken out to purchase the property and fund the completion of the conversion works. Because the existing lending was very expensive, securing financing quickly was imperative, and finding a competitive but timely solution was critical for the client.
To deliver the solution, we approached a specialist lender who could finance large-scale student accommodation. As the client was not quite ready to start the next stage of development work, we arranged an unregulated bridging loan of £5,152,000 – 46% loan-to-value against the property valued at £11,100,000 – allowing them to refinance the existing debt quickly and raise a small amount of working capital. The same lender would then provide a further tranche of funds to complete the development works, once they were in a position to start. We secured a fixed interest rate of 0.79% PCM, and due to the nature of the loan, interest and fees were rolled into the facility. As a result, no monthly payments needed to be made by the client during the loan term.
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