Purpose-Built Share Living (PBSL) is no longer a fringe concept. These purpose-designed buildings are quietly transforming how we think about housing, investment, and operations particularly in cities like Melbourne.
But for all the interest in coliving, one critical question remains under-addressed:
How do you value a 120-room PBSL asset when presenting to banks or institutional lenders?
The answer isn’t found in traditional apartment comparables. PBSL doesn’t fit neatly into the residential, student, or hotel boxes. It operates at the intersection of housing and hospitality and needs to be underwritten accordingly.
Here’s how that works.
Purpose-Built Share Living (PBSL) is no longer a fringe concept.
1. The Valuation Method: Income Capitalisation (or DCF)
Because PBSL is designed as a professionally managed, income-producing asset, its value is typically calculated using:
- Capitalisation of Net Operating Income, or
- Discounted Cash Flow (DCF) modelling over a 10-year hold
Unlike traditional residential, PBSL’s operating intensity and bundled service model means market sales comparisons have limited relevance.
2. Financial Breakdown of a 120-Room PBSL Asset
A. Gross Income Assumptions
- Location: Fitzroy, Melbourne
- Rooms: 120
- Average weekly rent: $450 per room (furnished, all-inclusive)
- Stabilised occupancy rate: 92%
Gross Annual Income
= 125 semi self-contained rooms × $450 × 52 weeks × 95%
= $2,778,750
B. Operating Expenses
Includes:
- Onsite management
- Utilities (electricity, water, internet)
- Cleaning, maintenance
- Leasing & marketing
- Insurance, council rates, admin
Operating Expense Ratio (OPEX): 30%
Total OPEX: $833,625
C. Net Operating Income (NOI)
NOI = Gross Income – Expenses
= $2,778,750 – $833,625
= $1,945,125
D. Capitalisation Rate (Cap Rate)
Cap rate reflects location, operator strength, lease risk, and asset quality.
Assume 5.75% for an inner-Melbourne PBSL asset.
E. Capitalised Valuation
Valuation = NOI ÷ Cap Rate
= $1,676,688 ÷ 0.0575
= $33.83 million
3. What Lenders Will Consider When Developing
Even with a clear NOI-based valuation, lenders evaluate financing risk for Build-to-Rent developments using development-focused metrics rather than traditional asset-based ratios.
A. Loan-to-Cost Ratio (LTC) / % of Total Development Cost (TDC
- Primary assessment metric during development
- Standard range for senior debt: 55–65% of Total Development Cost
- With mezzanine or preferred equity: up to 70–75% of TDC (higher cost of capital)
If Total Development Cost = $31M
Expected senior loan size at 60–65% LTC = $18.6M – $20.15M
B. Debt Service Coverage Ratio (DSCR)
- Common requirement: 1.4x – 1.6x DSCR
- Based on NOI of $1.676M and a 1.5x DSCR requirement, maximum annual debt service ≈ $1.12M
C. Stabilisation Period
Lenders may discount early-stage or unproven PBSL assets.
- Full valuation may only be recognised after 6–12 months of stabilised occupancy
- Pre-stabilisation, lenders may apply conservative cashflow assumptions
Summary – 120-Room PBSL Valuation Model
Component | Value |
Gross Annual Income | $2,778,750 |
Operating Expenses (30%) | $833,625 |
Net Operating Income | $1,945,125 |
Capitalisation Rate | 5.75% |
Valuation | $33.83 million |
Cost Efficiency Metrics
Metric | Result |
NOI Margin | 70% |
OPEX Ratio | 30% |
Development Margin | 9.1% |
Yield on Cost | 6.27% |
Final Thought
Purpose-Built Shared Living is emerging as a new category distinct from traditional residential, student housing, or hotels. With higher operational complexity comes greater potential for yield and investor alignment.
But it must be valued accordingly.
If you’re pitching PBSL to lenders or investors, your case needs to be built on:
- Stabilised, verifiable income
- Sensible OPEX ratios
- Operator credibility
- Service-led operational plans
- A risk-adjusted yield story
Because PBSL isn’t just a new form of housing.
It’s a new operating model and a new asset class in the making.
