Back on course: lenders look set for a return to student sector in autumn

A number of PBSA loans have been made in the past month, including Investec’s £17.5m senior loan to PBSA provider Scape for a scheme in Bloomsbury, London.

Last week, new student accommodation lending platform Kinetic Capital was launched with an initial commitment of £100m. It will offer a range of finance, including whole loans, mezzanine debt and bridging finance.

Meanwhile, UNIVA,Turkey’s largest PBSA provider, invested £10m in the acquisition of 140 flats in UK PBSA operator Opto Living’s new Cardiff PBSA scheme.

Debt adviser Brotherton Real Estate said that while loan-to-value ratios had fallen across the market and deals were taking longer to get done, deals could still be funded on standing student assets.

Brotherton said more lenders were structuring deals with interest reserve accounts, where lenders block 12 months’ interest in a charge account, to mitigate nervousness about cashflows.

Dan Uzan, managing director at Brotherton, said: “A number of senior lenders seem to be waiting for September to confirm that bookings and reservations materialise into students turning up for the next academic year. We expect that in September, when students hopefully return, more lenders will return to the sector.”

Erin Clarke, relationship director at Investec Structured Finance, said: “Anecdotal feedback is that lettings [for the 2020-21 academic year] are about 10% to 20% below where they were last year. For a lot of people, the target is 80% to 85% let.”

She added that PBSA will benefit from the counter-cyclical nature of student demand. Higher Education Statistics Agency figures show higher education enrolment increased notably in the past financial crash, partly because employment prospects collapsed.

This may also counteract the inevitable fall in the number of students travelling to study in the UK from overseas due to travel restrictions. “The job market isn’t looking brilliant,” said Clarke. “The thinking now is that while there won’t be as many international students this academic year, that drop will potentially be offset by an increase in local students.”

UCAS data shows there are more applicants holding a firm offer to start a course this autumn than at the equivalent point last year.

Meanwhile, 97% of universities plan to provide in-person teaching in the autumn term, according to the Universities UK survey published on 17 June.