Student Tower — 24 Storeys

A specialist PBSA developer had secured planning permission for a 24-storey purpose-built student accommodation tower adjacent to a Russell Group university. The scheme comprised 450 student beds across a mix of cluster flats and studios, with ground-floor amenity space including a gym, study rooms, and communal areas. Total development costs were approximately £48m — reflecting the premium build costs associated with a 24-storey reinforced concrete frame and the high specification required for institutional-grade PBSA.

The scale and nature of the project created significant funding challenges. High-rise student accommodation is a niche asset class that sits outside the comfort zone of most mainstream development lenders. The construction methodology — reinforced concrete frame with curtain walling — carries different risk profiles to traditional residential, and the income model (per-bed rental yields rather than capital sales) requires specialist underwriting capability.

Three interlocking elements needed to be resolved simultaneously — complicated further by the Building Safety Act requirements. As a Higher-Risk Building exceeding 18 metres, the scheme required BSR Gateway 2 approval before construction could commence, and Gateway 3 clearance before student occupation. The facility terms needed to accommodate both Gateway processing periods — particularly the Gateway 3 window between practical completion and first occupation, during which the full debt would be outstanding with no rental income flowing.

First, the senior debt: at £30m, this was a substantial single-asset exposure requiring a lender with genuine appetite for high-rise PBSA and the balance sheet capacity to hold the loan. The 24-month construction programme and concrete-frame methodology meant the lender needed experienced in-house monitoring capability.

Second, the equity. The developer had approximately £6m of their own capital available — well short of the £18m gap between senior debt and total costs. We needed to find an equity partner willing to co-invest on terms that incentivised the developer while providing an acceptable risk-adjusted return for the equity provider.

Third, the exit. Student accommodation is typically valued on an investment basis rather than sold as individual units. The developer wanted certainty of exit before committing to a £48m construction programme. This meant securing a forward commitment from an institutional buyer — a student housing REIT or fund willing to contract to purchase the completed, let asset at an agreed yield.

We structured the capital stack as a coordinated three-party arrangement, underpinned by a comprehensive development appraisal and investment model that we prepared to institutional standard. Senior debt of £30m was placed with a specialist real estate lender with an established PBSA lending book and in-house monitoring surveyors experienced in high-rise concrete-frame construction. The facility was at 7.0% per annum on a 24-month term with a 6-month extension option.

For the equity component, we introduced the developer to a real estate private equity fund specialising in student accommodation. The fund committed £12m as a joint venture equity partner, structured as preferred equity with a priority return of 10% per annum and a 60/40 profit split above hurdle in the developer's favour. Combined with the developer's £6m, the capital stack was fully funded at £48m.

The forward commit was the final piece. We facilitated introductions to three student housing REITs and the developer ultimately agreed a forward purchase with an institutional buyer at a net initial yield of 5.25% on projected stabilised rental income — equating to a gross asset value of approximately £58m on completion and full occupancy. Our appraisal and strategy documentation gave all parties the confidence to commit.

The fully coordinated capital stack — senior debt, equity joint venture, and forward commit — was documented and committed within twelve weeks. Construction commenced on programme with the concrete frame progressing at one floor per fortnight. The scheme is on track for completion within the 24-month construction programme, with the forward commit providing total certainty of exit.

Total senior debt finance costs are projected at £2.8m over the construction period. The scheme's projected profit of approximately 21% on cost is in line with institutional expectations for PBSA, and the developer's return on their £6m equity contribution — after the JV partner's preferred return and profit share — represents a significant multiple on capital.