Development lender Avamore Capital has expanded operations to support transactions in the PBSA sector.
The decision to lend into the sector marks the company’s first move outside of its core target market, UK residential property.
After eight years of operations, the company has lent over £600m across its four core products: Development, Refurbishment, Part Complete Development and Bridging.
This includes an £11m portfolio bridge secured against multiple sites in North Yorkshire and its largest deal to date – a £13.3m part-built scheme in Newbury.
After conducting thorough research into the sector, Avamore gained insights into currently underserved markets to support through its solution-driven approach to lending, having done this previously with its introduction of the Finish & Exit in 2019.
“Going forward, the forecast slowdown in planning and delivery of new beds, combined with rising student numbers, means the broad macro trend is favourable for developers and investors.
“The issues around affordability make it clear there is a growing requirement for small-scale, low amenity student housing targeted at domestic and price-sensitive international students. We have determined that this requirement can be serviced by the refurbishment of existing 1st generation PBSA stock and the repurposing and retrofitting of existing office/commercial stock, which fits extremely well with Avamore’s extensive experience in heavy residential refurbishments and office-to-resi PD conversions.
“We look forward to increasing our presence in the Student Accommodation sector and have ambitious plans to further improve how we can help developers through continued product innovation to give our brokers and borrowers the support they need.”Philip Gould, Chief Lending Officer, Avamore Capital
Now labelled as a Part Complete Development, the product looked to support projects which needed refinancing at any stage, alleviating the pressure felt by developers at the time from increased cost overruns and construction delays.
The company found that the current student-to-bed ratio in the UK is 2.3:1 reflecting the current sector-wide supply and demand imbalance.
The UK is currently home to 2.1 million full-time students and forecasts continue to predict strong growth in the number of national and international students applying for universities.
At a time when planning for new units has slowed due to declining site availability, alternative use cases and oversupply in certain locations means future supply growth is likely to remain low by historical standards.
Affordability of accommodation is also a major factor for most students, particularly for domestic students in which the majority use their student finance maintenance loans to cover the costs.
There are several cities in which the PBSA market is entirely out of reach for the average domestic student, and without additional income or financial support from family, there is a limited pool of housing available.