This significant transaction represents a complex yet crucial development in the UK’s purpose-built student accommodation (PBSA) sector. Arc & Co. has successfully structured a multifaceted funding package worth £40 million for a new 135-bed student accommodation project located in Bristol. The financing involved Downing LLP providing senior debt and Hame Capital acting as the equity partner in a joint venture with the project’s sponsor, Colico Living. This collaboration illustrates the dynamic nature of PBSA funding in the UK, particularly in a climate where the demand for high-quality student living continues to rise.
Funding Structure and Strategic Partnerships
The finalised financing package includes a senior development facility of approximately £26 million from Downing LLP, complemented by a preferred equity investment from Hame Capital. With a loan-to-gross development value ratio of around 68% and a loan-to-cost ratio of 77%, this strategic funding structure is designed to support the complete delivery of the Bristol scheme, from its inception through to stabilisation.
Corey Dennis, senior broker at Arc & Co., remarked, “This was a complex, multifaceted transaction given the scale of the project and the extensive planning process. We carefully structured the funding package to ensure the scheme was fully capitalised while supporting the sponsor’s overall strategy. It was about finding that specific alignment between Downing and Hame Capital that truly recognised the project’s long-term value.” This meticulous approach highlights the importance of strategic partnerships in navigating the complexities of the PBSA market.
Navigating Challenges in the Capital Markets
The transaction reflects more than a year of dedicated advisory efforts, during which Dennis and his team adeptly managed the selective capital markets environment. They encountered intricate valuation challenges and undertook a complete redraft of the planning application to meet amenity space requirements, ultimately securing the necessary approvals. The successful navigation of these hurdles has culminated in a comprehensive funding solution that aligns seamlessly with the scheme’s ambitious 43-month build programme.
Will Powell, investment director at Downing LLP, expressed satisfaction with the outcome, stating, “We were delighted to close this significant funding package for an experienced and capable sponsor delivering a well-designed student scheme in central Bristol. The financing came with a number of complexities concurrent with this type of deal, and we are looking forward to seeing the project progress over the coming months. A big thanks to all involved.” This sentiment underscores the collaborative spirit essential for success in the PBSA sector.
Market Trends and Future Outlook
The development is strategically positioned to cater to Bristol’s two prominent universities and is scheduled to advance through Gateway 2, with construction anticipated to commence in early 2027. This project not only addresses the growing demand for student accommodation in Bristol but also reflects a broader market shift. According to industry insights, developers are increasingly focusing on asset stabilisation rather than pursuing disposals, particularly due to a sluggish sales market that naturally impacts liquidity. In this evolving landscape, the success of developments hinges on securing partnerships with stakeholders who possess a deep understanding of the entire capital stack.
The growing emphasis on the importance of specialised knowledge in structuring funding packages is evident in this transaction. As the UK PBSA market continues to evolve, those who can effectively navigate these complexities will be best positioned to succeed.