Extra Care Facility — 60 Beds

A specialist care developer had planning permission for a 60-bed extra care facility on a site in the West Midlands. The scheme fell under C2 use class — a category that sits between traditional residential and full care home, providing independent living apartments with on-site care and communal facilities. Total development costs were approximately £14.4m with a projected end value of £16.5m based on a forward sale to a housing association.

The developer had approached four lenders directly and been declined by all of them. The consistent feedback was that C2 extra care is a specialist operational asset class that mainstream development lenders don't feel equipped to assess. Lenders were uncertain about the exit strategy, the operating model, and the valuation methodology — which differs significantly from standard residential.

A housing association had expressed strong interest in acquiring the completed facility on a forward-funded basis, but the terms hadn't been finalised and no commitment was in place.

C2 extra care sits in a gap between residential development and healthcare property. The valuation methodology relies heavily on the operational income stream rather than comparable sales evidence — a fundamentally different approach to the GDV-driven model that residential lenders are comfortable with. The monitoring surveyor needs to understand care-standard specifications, CQC requirements, and the particular construction standards that extra care demands.

The forward funding element with the housing association added a further dimension. If the housing association's commitment could be formalised before drawdown, it would significantly de-risk the deal for any senior lender — effectively converting the exit from a speculative sale to a pre-sold contract. However, housing associations move slowly, and the developer needed to start on site within 3 months to satisfy a planning condition.

We needed a lender who understood C2, could work with a forward funding exit, and was prepared to accept that the housing association commitment might not be fully documented at the point of initial drawdown.

We identified two lenders on our panel with specific C2 extra care experience and presented the deal to both simultaneously. We produced a bespoke development appraisal and full business plan that modelled the scheme on both a GDV basis (assuming individual unit sales) and an operational basis (assuming sale as a going concern to the housing association). The quality of the presentation — including detailed cashflow modelling and a clear strategy for the forward funding exit — gave the lenders confidence in a sector they might otherwise have declined.

We structured the facility at 68% LTC with a 20-month term. Critically, we negotiated a condition that allowed drawdown to commence before the housing association's forward commitment was fully documented — on the basis that Heads of Terms were signed and solicitors were instructed on both sides. This allowed the developer to start on site within the planning deadline.

We also introduced the developer to a specialist care sector solicitor from our network, which accelerated the forward funding documentation and ensured the legal structure was appropriate for a C2 asset.

The facility completed in 19 months — one month ahead of programme. The housing association's forward commitment was formally documented 4 months into the construction period, at which point the lender reduced the interest margin by 0.25% to reflect the de-risked exit. Total finance costs were approximately £774k at a blended rate of 7.9% per annum.

The housing association completed the purchase on practical completion, paying the full £16.5m agreed under the forward commitment. The developer achieved their target return and has since instructed us on two further extra care schemes — one in Lancashire and one in Somerset. The lender has confirmed they will support both, based on the successful delivery of this scheme.