Paragon expands Development Finance proposition into Build-to-Rent market

By Bridging Loan Directory 6th November 2023

Paragon Bank’s Development Finance division has extended its range of funding options to provide finance of up to £35 million to support the acquisition and development of institutional-grade Build to Rent (BTR) schemes.

The BTR market continues to grow in the UK and provides a vital complementary source of housing to the traditional build-to-sell model.

According to data released by the British Property Federation, prepared by Savills, over 90,000 BTR units have been delivered to date with a further 50,000 plus units in development.

The BTR market is now extending to Single Family Housing (SFH), which accounts for over 10% of this marketplace and has seen increasing focus and support over the past 12 to 18 months.

Paragon’s BTR proposition will support the lifecycle of BTR schemes in established residential locations in cities and large towns across the UK, including site acquisition, development, the letting of a completed scheme and a short-term stabilisation facility.

Paragon’s proposition also supports the developer in taking the opportunity to benefit from the potential growth in the rental market through the development term by retaining the scheme after it is completed.

The traditional BTR funding model is either a forward-funded or forward-purchase scheme. Whilst this has its benefits to the developer it can limit the potential upside.

Paragon Development Finance is a well-established development funding partner and is part of the FTSE 250-listed Paragon Banking Group.

It boasts a team of experienced Relationship Directors, specialising in supporting clients to develop residential schemes for sale or letting. The launch builds on Paragon’s successful experience in the Purpose Built Student Accommodation sector.

Neal Moy, Managing Director of Paragon Development Finance, said:

“The BTR market is a natural extension of our proposition to support experienced residential developers.

The sector has continued to enjoy strong growth and complements the buy-to-let market in offering a good quality home in the private rented sector.

“We ae offering something different to the typical BTR funding model where the developer holds most of the development risk but has limited upside benefit.

We believe that the developer can benefit by retaining the scheme post practical completion, enabling them to deliver stabilised income-producing institutional-grade mid-size BTR schemes.”

Simon Dekker, Senior Relationship Director for Paragon Development Finance added:

“The housing market in the UK continues to evolve, with the expanding BTR market providing an increasing alternative to the traditional build-to-sell model as the demands of the UK’s population changes.

We have supported the PBSA market over many years and believe that now is the right time to add our experience and support to the BTR sector.”