A purpose-built student accommodation (PBSA) block in central Liverpool — 210 en-suite cluster rooms across six floors, complete and tenanted, but sitting on a development loan burning at 1.1% per month. The developer had delivered the scheme on time and on budget, secured 94% occupancy for the academic year, and now faced the same problem every developer faces at this stage: the development facility was expensive, the term was expiring, and the exit — an institutional sale — needed another 9-12 months to execute properly. Sell now and leave millions on the table, or refinance and buy time. We arranged a £10.2 million bridging facility that cut the monthly rate from 1.1% to 0.65%, saving £46,000 per month, and gave the developer 18 months to complete an institutional disposal at full value.
| Detail | |
|---|---|
| Finance type | Bridging finance — PBSA development exit |
| Total facility | £10,200,000 |
| Property | Purpose-built student accommodation, Liverpool city centre |
| Accommodation | 210 en-suite cluster rooms across 6 floors |
| Existing facility | £9,800,000 development loan at 1.1% per month |
| Existing term remaining | 3 months (no extension available) |
| Exit facility rate | 0.65% per month |
| Exit facility term | 18 months |
| Open market value (RICS) | £15,500,000 |
| LTV on OMV | 66% |
| Occupancy at completion | 94% (198 of 210 rooms let) |
| Annual rental income | £1,680,000 (fully let basis) |
| Monthly interest saving | £46,200 (from £107,800 to £61,600) |
| Exit strategy | Institutional sale to PBSA fund |
| Time to completion | 6 weeks |
Most bridging lenders are comfortable with residential property, standard commercial property, and even mixed-use assets. Purpose-built student accommodation is a different animal. It's a commercial investment asset valued on a yield basis, with income dependent on annual tenancy cycles, university intakes, and local demand-supply dynamics. Many bridging lenders simply don't have the underwriting expertise to assess PBSA — they don't know how to read a cluster room layout, how to assess occupancy risk across the academic calendar, or how to interpret the rental evidence. The pool of lenders with genuine PBSA bridging capability is small.
Bridging finance at £10 million plus moves into a different tier of lender. Most bridging lenders cap individual facilities at £3-5 million. Facilities above £5 million require lenders with larger balance sheets or syndicated structures, and the credit committee process is more rigorous — involving senior credit sign-off, detailed asset analysis, and often a presentation to the lender's investment committee. At £10.2 million, this deal required a lender with both PBSA expertise and the capacity to write an eight-figure facility on a single asset.
The development loan had three months of term remaining, with no extension available. The lender had made it clear that they expected repayment on schedule — and at 1.1% per month on £9.8 million, the interest accrual was £107,800 every month. Every additional month on the development facility cost the developer over £100,000 in interest alone. The exit bridging facility had to be arranged, underwritten, valued, and legally completed within 12 weeks — or the developer faced default on the development loan, which would trigger enforcement and a forced sale at a significant discount.
The exit strategy was an institutional sale — disposing of the completed, tenanted PBSA block to a specialist student accommodation fund or REIT. This is the optimal exit for large PBSA schemes, as institutional buyers pay a yield-based price that reflects the stabilized income. But bridging lenders need more than "we'll sell it to a fund." They need evidence: which funds are actively acquiring in Liverpool, what yield are they buying at, what is the expected sale price, and what is the realistic timeline? The exit had to be documented with the same rigour as the original development facility's exit strategy.
We identified a lender with two critical capabilities: a dedicated PBSA underwriting team that understood student accommodation valuation, and the balance sheet capacity to write a £10.2 million facility on a single asset without syndication. This combination eliminated several otherwise viable lenders — those who understood PBSA but couldn't write the size, and those who could write the size but didn't understand the asset class. The lender we selected had a track record of PBSA bridging facilities in university cities and had previously funded schemes in Leeds, Manchester, and Birmingham.
The RICS valuation was instructed on an investment basis — capitalising the stabilised net operating income at a market yield. The valuer assessed the rental income per room (£8,000 per room per year average, supported by current tenancy agreements), applied a gross-to-net adjustment for voids, management, and maintenance (approximately 25%), and capitalised the net income at a yield of 8.0%. This produced an open market value of £15.5 million — comfortably supporting the £10.2 million facility at 66% LTV.
The valuation process required a specialist PBSA surveyor rather than a general commercial valuer. We worked with the lender to ensure the right surveyor was appointed — one with specific Liverpool PBSA market knowledge and access to comparable investment transactions. The valuation took 8 working days from instruction to report, slightly longer than a standard residential bridging valuation but well within the 12-week window.
The £10.2 million facility was structured to cover three components: £9.8 million to repay the existing development loan in full (including accrued interest and exit fees), £250,000 for arrangement and legal costs, and £150,000 as a retained interest reserve to cover the first three months of bridging interest — giving the developer breathing room before the rental income needed to service the loan directly.
The rate of 0.65% per month compared to the existing 1.1% saved £46,200 per month — £554,400 over the 12-month period before the institutional sale was expected to complete. The 18-month term provided a comfortable buffer beyond the expected 12-month sale timeline.
💡 Key point on PBSA exits: The interest saving on a large development exit is not just a cost reduction — it's a profit protection mechanism. On this deal, the £46,000 monthly saving over 12 months represented approximately £554,000 preserved in the developer's profit. Combined with the higher sale price achievable through an unhurried institutional disposal versus a forced sale, the exit bridging facility was worth well over £1 million to the developer.
The exit strategy was the most scrutinised element of the credit submission. We assembled a comprehensive exit evidence pack that included:
The dual-exit strategy (sale or refinance) gave the lender confidence that the facility would be repaid within term regardless of market conditions. The fallback refinance was particularly important — it demonstrated that even if the institutional sale market softened, the rental income supported a commercial mortgage that could clear the bridge.
Reviewed the existing development facility, the PBSA occupancy data, and the rental income. Assembled the institutional exit evidence pack. Identified the specialist PBSA bridging lender and submitted a heads-of-terms with a summary credit narrative.
Full credit submission including PBSA performance data, tenancy schedule, RICS valuation instruction request, institutional exit evidence, and fallback refinance analysis. DIP issued at credit committee within 8 working days. Specialist PBSA surveyor instructed.
RICS valuation completed at £15.5 million on an investment basis. Formal facility offer issued confirming £10.2 million at 0.65% per month over 18 months, with retained interest reserve and dual-exit strategy conditions. Legal work commenced immediately on parallel track.
Legal work on a commercial asset of this scale is substantial — title review, existing lender settlement coordination, first charge registration, and facility documentation. Completed within 10 working days of the formal offer. Development loan repaid in full. £10.2 million bridging facility drawn.
Default on development loan. Enforced disposal at approximately £13.5m (10-12% discount to OMV for a forced sale of a large PBSA asset). Developer profit eroded by £2m+ in sale discount plus continued interest at 1.1% during the sale process.
18-month runway at 0.65%. Institutional disposal at £15.5m (full OMV) within 12 months. Interest saving of £554,400 over 12 months. Additional sale proceeds of approximately £2m versus forced sale. Net benefit to developer: approximately £2.5m.
"This developer had built a £15.5 million PBSA asset and was about to lose £2 million to a forced sale because the development loan was expiring. We replaced a 1.1% development facility with a 0.65% bridge, gave him 18 months to sell properly, and saved him £46,000 a month in the process. The exit bridge didn't just reduce the cost of finance — it protected the profit the developer had spent two years building."
— MW Capital AdvisoryIf you've completed a student accommodation scheme and your development facility is running out of term, don't wait for a forced sale. We know which lenders write eight-figure PBSA bridging facilities, how to structure the institutional exit evidence, and how to move fast enough to protect your profit. Speak to us before the clock runs out.
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