A specialist lender has advanced £13.3 million in growth finance to back a new 75-bed care home in Chester, highlighting continued institutional appetite for care sector assets despite broader property market headwinds.
The deal between Paragon Development Finance and North Bay Group represents the lender's first completed transaction with the operator. A second scheme has already received approval, with three further opportunities progressing through the pipeline.
The short version
- £13.3 million growth finance facility from Paragon Development Finance
- 75-bed purpose-built care home in Chester, Cheshire
- Construction began Q1 2026; completion targeted for late 2027
- EPC A rating targeted with renewable energy and solar PV
- Cheshire West and Chester: 370,000 residents, over 20% aged 65+
The deal structure
The funding package includes an initial land advance and covers full development and fit-out costs. North Bay Group will deliver residential and nursing care, with every bedroom featuring a private wet room.
The developer operates through a fully integrated model, handling both development and running of care homes. Established in 2007, North Bay currently manages 48 facilities with more than 2,500 beds across the UK. Upon completion, the Chester facility will be operated by Highgate Care as part of its expansion strategy.
Adrian Reeves, senior relationship director at Paragon Development Finance, said delivering modern, fit-for-purpose care homes is vital to meeting rising demand in areas with ageing populations. Richard Hoggart, chief executive at North Bay Group, described the scheme as a strong example of the company's long-term commitment to communities where demand for quality care continues to grow.
Why this matters
The transaction lands in a mixed property investment environment. Residential landlords are trimming portfolios amid regulatory pressure and rising costs. Yet care homes occupy different territory: they serve a demographic need that cannot be displaced by remote work, e-commerce, or structural forces hammering office and retail.
Cheshire West and Chester's age profile makes the location instructive. More than one-fifth of its 370,000 residents are already over 65, a proportion projected to climb further over the next decade. Care operators and their finance partners are pricing that certainty into development pipelines.
Paragon's willingness to commit capital here—and to signal more deals in the pipeline—suggests the lender views healthcare real estate as a growth category rather than a defensive holding. The integrated developer-operator model carries particular appeal: one entity controls construction quality and ongoing operations, reducing the hand-off risk that lenders often worry about.
The EPC A target is worth noting. New build care homes with sustainability credentials attract a different commissioning profile than older stock. As local authorities and NHS trusts increasingly tie funding decisions to environmental standards, developers chasing high EPC ratings are positioning for institutional-grade assets.
Who should care
| Stakeholder | What this deal signals |
|---|---|
| Property developers | Care home development finance remains accessible where demographic demand is proven |
| Care operators | Lenders value integrated models that control both construction and operations |
| Local authorities | New supply is coming to an area where 20%+ residents already need care services |
| Healthcare investors | EPC A targets align with commissioning requirements for NHS and council contracts |
| Construction firms | Specialist care builds with sustainability credentials are attracting institutional backing |
What to watch next
Paragon and North Bay have a second scheme already approved and three further opportunities progressing. Watch whether the pipeline accelerates as other lenders identify the same demographic tailwind. Also watch whether rising construction costs put pressure on those targeted EPC ratings or delay timelines. For now, the Chester deal signals that specialist finance is open for business in this corner of commercial real estate.
Key takeaways
- Care home development finance is attracting lenders seeking exposure to demographic-driven demand rather than cyclical property segments
- Fully integrated developer-operator models appeal to finance providers by reducing hand-off risk between construction and operations
- EPC A targets on new schemes reflect growing commissioning requirements and investor expectations for institutional-grade assets
- The Chester deal sits within a wider pipeline, suggesting this is a strategic focus rather than a one-off transaction
Frequently asked questions
What is a wet room in a care home context?
A wet room is a fully waterproofed bathroom where the shower area is flush with the floor and there is no threshold or cubicle, making it accessible for residents with mobility difficulties.
How does development finance differ from standard mortgage lending?
Development finance covers the construction phase of a project, typically released in staged draws as work progresses, whereas standard mortgage lending applies to completed properties or long-term acquisitions.
Why are care homes attracting growth finance when other commercial sectors face headwinds?
Care homes serve a demographic need that is growing regardless of economic cycles, with demand driven by population ageing rather than employment trends or consumer spending patterns.
What does EPC A rating mean for a care home?
EPC A represents the highest energy efficiency rating under the UK Energy Performance Certificate scheme, indicating lower operating costs and alignment with sustainability standards increasingly required by commissioners and investors.
How does the integrated developer-operator model work?
North Bay Group both builds and operates its care homes, meaning the same company is responsible for construction quality and ongoing resident care, which lenders often view as reducing operational handoff risk.