The world’s largest “co-living” scheme at Old Oak Common in west London has been put up for sale, in what is being seen as a litmus test for the asset class.
More than £100m is being sought for the 546-bed, 323-flat scheme, operated by the Collective. The asking price reflects a yield of 4% and 5% depending on the proportion of students occupiers, who pay lower rents.
Collective Old Oak has been operational for almost a year and is 97% occupied. Rents range from £230 to £330 per week, which includes all bills.
The Collective, which also has sites in King’s Cross, Kentish Town and Stratford, is not the majority owner of the property, though it retains an interest.
According to the Land Registry, the scheme is owned by Singapore-incorporated London Properties PTE, which bought it for more than £11m in 2014, and is financed by Singapore-based United Overseas Bank.
In an interview with EG in 2014, Collective chief executive Reza Merchant said that funding for the business came from a number of sources.
“It’s a mix of equity we have built up through the existing business and investment from friends and family. A Singaporean family we know who own a bank have provided most of the equity for our upcoming schemes and we get development finance from their bank at incredibly competitive rates.”
An exit from the scheme will provide an opportunity to measure investor interest in the co-living asset class, which offers smaller flats but includes a number of communal amenities to encourage socialising.
Its hybrid position between the student and PRS markets, which are raising billions in investment, means it could attract interest from a variety of institutional investors.
The fact that the asset has stabilised at almost full occupancy after only a few months also shows substantial tenant demand for the sector.
Merchant said: “Given that Old Oak is now fully let and the co-living business model has been proven, we feel it is the right time to assess the appetite of the investment market for this emerging asset class.
“This will enable further growth in our sector and support our plans to open 20,000 co-living units globally over the next five to seven years. We are therefore committed to operating and, if necessary, retaining a stake in, all of our co-living schemes, including Old Oak.”
Creating scale in the sector may be difficult, however, owing to planning restrictions and minimum space regulations.
At Old Oak, planning was originally granted for a 323-student bed scheme in 2011. The Collective then altered the permission in 2014 when the building was brought through a reserved matters application, which allowed 30% of the scheme to be “co-living”. In the planning documentation, “co-living” was defined as shared accommodation for students, employed graduates and young professionals aged between 18 and 35.
Once the scheme opened its doors in May 2016, the Collective went back to the planners again to switch the mix, allowing 80% of the scheme to be co-living and 20% student accommodation.
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