Octopus Property completes its largest development loan

Octopus Property has agreed to provide a £36m senior loan for the development of a major purpose-built student accommodation (PBSA) scheme in Coventry.

The loan provided to EREC Estates Ltd will fund the development, which comprises two buildings totalling 502 beds, a mix of clusters and studios, and features a variety of high-quality communal facilities and retail offerings.

The deal was introduced to Octopus Property by John Kerrigan, director at Arc & Co, who advised EREC Estates Ltd on the debt structure.

“While we are seeing some geographical polarisation caused by oversupply, the student accommodation sector remains one of the most attractive asset classes for investors,” said Gavin Eustace, head of residential development at Octopus Property.

“It’s a sector that we like, and as long as the broader, favourable supply-demand dynamics remain in place for this type of innovative and high-specification accommodation, we will continue to back schemes that require bespoke and efficient financing facilities.”

This transaction represents the largest single development loan completed by Octopus Property.

The 27-month facility marks the third partnership between Octopus Property and EREC Estates Ltd, following two smaller PBSA developments in Leicester and Coventry.

“Starting 2019 with our largest ever development facility is a significant milestone for the team and demonstrates our evolving maturity and ability to compete with major institutional lenders,” added Gavin.

“Growing the development loan book is a key priority moving forward and working alongside our key partners should see us doing similar-sized deals more regularly.”

John said that the completion of the transaction was a real milestone for all involved and was the culmination of 12 months of hard work on what had been a very complex deal, both from a real estate and funding perspective.

“However, the underlying proposition was extremely strong and supported by a very high-calibre sponsor and funder, both of whom were a pleasure to work with.”

Last week, Octopus Property completed a £2.5m development exit loan on the conversion development of a former school bursar’s office into six high-end residential apartments in Bristol.

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