Pallas Capital has provided an £8.2 million development loan to convert a vacant educational building in central Leicester into a 98-bed purpose-built student accommodation scheme.
The 27-month facility, agreed at 70% loan-to-gross-development-value, will fund the change from educational use through to completion. The borrower intends to refinance with a term facility once the scheme is fully let and producing income.
Mark Witherington, senior originator, and Ryan Houssart, underwriter, led the transaction for Pallas Capital. They worked directly with the borrower, an experienced developer whose previous projects include co-living schemes.
Pallas says its assessment focused on the development’s expected performance once operational, including likely occupier demand and income, and the borrower’s proposed refinancing exit.
The transaction comes amid a continuing shortage of purpose-built student accommodation in Britain. CBRE’s outlook for 2026 points to a structural undersupply of student beds, while Savills estimates that the national stock has passed 700,000 beds.
New development remains constrained by higher construction costs and a more selective planning environment. The reuse of existing buildings is consequently seen by industry specialists as an increasingly viable way to add accommodation.
Houssart says: “Change of use schemes ask you to think beyond the build itself. You need a clear picture of how the finished asset will actually work once it’s operational, and having that grounding in PBSA gave us real confidence in structuring this facility around the borrower’s exit from the outset.
“It also helped that we were working with such a proactive, engaged developer throughout, which made the whole process a genuinely collaborative one.”
Witherington adds: “Our team is spread right across the UK, not just clustered around London, and in development finance that really matters. I’ve covered the Midlands for 38 years, and Leicester is my home city, so I know it, and the towns around it, in real detail rather than from a spreadsheet.
“Nottingham, Leicester and Derby sit close together on a map, but they’re genuinely different places economically, and understanding what makes each one tick day to day is a big part of how we’re able to lend with confidence wherever in the UK a deal comes from.”
Pallas Capital said it would continue to support the borrower as the scheme moves towards completion and stabilisation.
