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Paragon expands development finance proposition into build-to-rent

Paragon Bank has started offering loans of £10-35 million to support the acquisition and development of build-to-rent schemes.

According to the lender’s website it offers lending up to 65% gross development value, its proposition is available in England, Scotland and Wales, while it offers loan terms of up to 33 months.

It didn’t specify the rates being charged.

Neal Moy, managing director of Paragon Development Finance, said: “The BTR 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 BTR 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 BTR schemes.”

Over 90,000 build to rent units have been delivered to date, with a further 50,000+ units in development, according to data released by the British Property Federation.

The BTR market is now extending to Single Family Housing (SFH), which accounts for over 10% of the marketplace, and has seen increasing focus and support over the past 12 to 18 months.

The lender said the traditional BTR funding model is either a forward-funded or forward-purchase scheme. Whilst this has its benefits to the developer it can limit the potential upside.

Simon Dekker, senior relationship director for Paragon Development Finance, added: “The housing market in the UK continues to evolve, with the expanding BTR 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 BTR sector.”