Paragon expands development finance proposition into BTR

Extending upon its range of funding options, a division of Paragon Bank will provide financing that will support the Build to Rent market.

View of London from Newfoundland's Build to Rent building. Image credit - Vertus | BTR News
View of London from Newfoundland's Build to Rent building. Image credit: Vertus.

Paragon Bank’s Development Finance division has announced that it is providing finance of up to £35m to support the acquisition and development of institutional-grade Build to Rent schemes. Paragon Development Finance is a well-established development funding partner and is part of the FTSE 250-listed Paragon Banking Group.

Paragon’s Build to Rent proposition will support the lifecycle of Build to Rent schemes in established residential locations in cities and large towns across the UK, including site acquisition, development, the letting of a completed scheme and a short-term stabilisation facility.

The proposition also supports the developer in taking the opportunity to benefit from the potential growth in the rental market through the development term by retaining the scheme after it is completed.

“The Build to Rent market is a natural extension of our proposition to support experienced residential developers. The sector has continued to enjoy strong growth and complements the buy-to-let market in offering a good quality home in the private rented sector. We are offering something different to the typical Build to Rent funding model where the developer holds most of the development risk but has limited upside benefit. We believe that the developer can benefit by retaining the scheme post practical completion, enabling them to deliver stabilised income-producing institutional-grade mid-size Build to Rent schemes.”

Neal Moy, Managing Director (MD), Paragon Development Finance

Following the growth of the Build to Rent market in the UK, Paragon aims to help support the sector by providing a vital source of housing to the traditional build-to-sell model.

The traditional Build to Rent funding model is either a forward-funded or forward-purchase scheme – and whilst this has its benefits to the developer, it can also limit the potential upside.

“The housing market in the UK continues to evolve, with the expanding Build to Rent market providing an increasing alternative to the traditional build-to-sell model as the demands of the UK’s population changes. We have supported the PBSA market over many years and believe that now is the right time to add our experience and support to the Build to Rent sector.”

Simon Dekker, Senior Relationship Director, Paragon Development Finance