The Collective….Co-Living or Accommodation Provider?

Main Photo: The Conservatory at the Paper Factory in New York

Date: May 2020

Location: Battersea, London & New York

Name: TBA

No. of Keys: 263 in London, 125 in New York

Who are They: Co-living investor The Collective has won approval for its latest development in London, heralding a more flexible approach to developments in the UK capital. The good news comes as the company seeks to mitigate pressures from the covid-19 lockdown, by switching to longer stay rentals. Its short stay business has been hit due to university closures and restrictions on office workers in London.

In a statement, Collective corporate affairs director James Penfold said: “We are in the early stages of exploring a range of options for various assets in our portfolio, including a partnership with the New York City Department of Health and Mental Hygiene to repurpose The Collective Paper Factory to support short- to long-term patients who do not have a safe and secure place in which to self-isolate.”

“In the UK, we are housing NHS staff and vital key workers across our portfolio, and are exploring the opportunity to allow them to stay for longer periods in those buildings and across our portfolio.”

The Battersea project includes a mix of co-living space, workspace and study facilities, community space and a restaurant, in two linked blocks of seven and eight stories. With short term rental permitted, some of the rooms will effectively providing hotel-style accommodation.

The intention is that the 263 co-living rooms will be split with two thirds for long stay tenancies, and one third used for shorter stays, from one night. Around 35% of the accommodation will be restricted to below market rent pricing, and offered to local key workers, on lower incomes. The property also has strong green credentials, with the design including rooftop allotments and gardens.

With a core of developments completed and successfully rented in London, The Collective is now looking further afield. Founder Reza Merchant has previously indicated that Ireland and Germany could be attractive development locations to add to the portfolio, while in the UK, cities such as Manchester, Birmingham and Leeds are being considered.

The brand also launched in the USA, with a site in New York opening at the end of last year. There, its Paper Factory project has 125 units, with rental contracts from one night to 29 days. The company aims to expand the scheme, adding more floors to the block and providing a further 100 units in due course. The property, bought in spring 2019 for a reported US$58m, was previously a boutique hotel, and continues to market its accommodation as a hotel, including listings on Booking.com.

Also in New York, the company has been adding sites in Brooklyn, where it has three sites in development. 1215 Fulton Street, expected to open in late 2021, will be followed by 555 Broadway and North 8th in 2022. It is understood these properties will, in common with the Paper Factory, offer student accommodation alongside studios available for stays from one night to one month, and will feature student lounges, classroom space, fitness facilities and an arts programme. ACRES Capital has loaned US$75m to finance construction of the North 8th project.

Elsewhere in the US, The Collective has sites in Miami and Chicago. In the Wynwood district of Miami, a US$210m project will see blocks of eight to 12 storeys with ground floor retail and restaurants, developed with local partner Tony Cho. The numbers and breakdown of accommodation have yet to be determined.

In Chicago’s South Loop district, the company has taken on a parking lot site in South LaSalle Street, where it aims to develop a 17 storey block with around 500 units. The group has amassed considerable financial backing to support its expansion, aiming to grow a portfolio of 100,000 units. A £140m package has been arranged with Deutsche Bank and GCP Asset Backed Income Fund, under a four year arrangement.

Last autumn, The Collective linked with DTZ Investors, aiming to build a £650m fund to acquire co-living projects in London. It was set up with an initial £70m, and a commitment to acquire a 222 unit site in Harrow as well as purchasing other Collective projects in due course. The aim is to build a £1bn portfolio, buying over the first four years and exiting in ten, with investors gaining an 8-10% return.

Hotel Analyst perspective [by Chris Bown]: Is The Collective a co-living brand, or an accommodation brand? Discuss….. Take a look at its current London portfolio, and you’d call it a co-living provider. Take a closer look at the US property it runs, and you’d definitely call that a hotel – it’s called one, and you can rent a room for the night.

What’s coming down the pipeline, both sides of the Atlantic, speaks to the ever more fluid style of modern operational real estate. And the Battersea project appears to have finessed a mix of accommodation that will also meet the requirements of planners to provide spaces where key workers can afford to live, that are not an exhausting commute from their place of work. In cities the world over, that remains a challenge.

It’s also clear, from various comments made to the media, that The Collective is currently looking to expand in areas where it won’t be tripped up by local planners who still get sniffy about the idea of co-living. It’s a thing, happening in key cities around the world, and those authorities who still insist on minimum space standards, and view co-living rooms as a cramped version of studio apartments, don’t get on the shortlist.

THPT Comment: As Chris Bown says, the edges continually get blurred – hotel, serviced apartments, co-living, co-working and why not…The US invented the motel, which gave rise to budget-hotels, a whole sector in it’s own right.

First Seen: Hotel Analyst

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