Mortimer Street Capital has arranged a £4.1m student portfolio refinance from Secure Trust Bank Business Finance, secured against 11 student houses in Coventry and Cardiff.
The five-year facility repays the borrower’s existing lender and releases a modest amount of equity. The portfolio comprises 80 bedrooms let to students at the University of Warwick, Coventry University and Cardiff University, and generates around £540,000 a year in rental income.
All 11 houses hold HMO licences, and several have gained extensions or loft conversions to increase the number of lettable rooms.
Structuring the student portfolio refinance
Rather than a single loan, the debt splits into two tranches: £3.1m on a five-year fixed rate and £1m on a variable rate. Split facilities of this kind are uncommon, but the structure gave the client certainty on most of the debt, plus the flexibility to pay down the variable tranche early without long-term repayment penalties. The loan runs on an interest-only basis at 70% LTV, against a portfolio valuation of £5.86m.
Ownership added complexity. Shares sit across several classes, some held through bare trusts, and existing shareholder loans had to be subordinated to the bank, so they rank behind its debt.
The security package therefore includes a share charge and a deed of subordination, alongside legal charges over each property, a debenture and an assignment of rental income. Dovetail acted for the lender, while Howells and Brodies acted for the borrower.
“This was a portfolio with a lot of moving parts: 11 properties across two cities, a layered ownership structure and a client who needed both certainty and flexibility from their debt,” said Hiten Ganatra, chief executive officer of Mortimer Street Capital (pictured).
“Usually that means compromising on one or the other. By splitting the facility into fixed and variable tranches, we didn’t have to.
“Deals like this are won in the structuring, not just in finding a lender. Secure Trust Bank understood the student housing sector and backed the client from the outset, and credit also goes to Dovetail, Howells and Brodies, who worked through some complex legal issues to get us over the line.”
“Every property investment portfolio has its own requirements and it’s important that the finance is structured to reflect the borrower’s objectives and the assets involved,” commented Mike Feasey, head of bridging at Secure Trust Bank Business Finance.
“In this case, the split-tranche structure provided a balance of certainty and flexibility, allowing the borrower to fix the majority of the debt while retaining the option to repay the remaining tranche early.
“Student accommodation is a sector where understanding the underlying properties, their rental profile, and the local student market is important when assessing a transaction. We worked closely with Mortimer Street Capital and the professional teams involved to put a facility in place that met the client’s requirements while providing an appropriate structure for the bank.”
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