Specialist lender Pallas Capital has completed an £8.2m development finance facility to fund the change of use of a vacant educational building in central Leicester into a 98-bed purpose-built student accommodation (PBSA) scheme.
The 27-month facility, structured at 70% LTGDV, covers the site’s conversion from its previous educational (F1) use through to completion of the build. The borrower intends to refinance onto a term facility once the scheme is fully let and generating income.
Senior originator Mark Witherington and underwriter Ryan Houssart led the transaction for Pallas Capital, working directly with the borrower, an experienced developer with a background in co-living schemes.
The team’s underwriting drew on its familiarity with PBSA, focusing closely on how the finished scheme would perform once operational. That understanding of likely occupier demand and income helped underpin the lender’s confidence in the exit.
The deal lands as supply of PBSA remains an area of significant demand. CBRE’s 2026 outlook for the sector points to a continuing structural shortage of student beds in the UK, even as national stock has grown past 700,000 beds, according to Savills.
New development remains constrained by rising construction costs and a more selective planning environment, and industry specialists increasingly point to the adaptive reuse of existing buildings, rather than ground-up construction, as one of the more viable routes to new PBSA supply.
“Change of use schemes ask you to think beyond the build itself,” said Ryan Houssart, underwriter at Pallas Capital.
“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.”
“Our team is spread right across the UK, not just clustered around London, and in development finance that really matters,” said Mark Witherington, senior originator at Pallas Capital.
“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.”
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