The Collective has fallen into administration after failing to secure investment through a sale of the company.
The developer was widely recognised as the poster child for co-living, but had been hit with loss of income and development delays during the pandemic.
Matthew Boyd Callaghan, Andrew Johnson and Lisa Rickelton from FTI Consulting have been appointed joint administrators to parent company The Collective (Living) Group Limited and the operating company The Collective (Living) Limited.
The companies own two operational co-living schemes in the UK at Old Oak and Canary Wharf, and an apart-hotel in New York.
The Collective also has a further four sites currently under construction and 13 in pre-development in the UK, Ireland, Germany and the US. Most recently, it lodged plans just last month for a 376-bed scheme at Keith House in Hayes, west London.
Reza Mercant founded The Collective in 2012. The developer has 1,623 beds in operation and a further 6,590 in the pipeline. Merchant previously said he aimed to grow this to 100,000 by 2025. Recent development has been funded by the COLIV fund from DTZ Investors, which aims to deploy £1bn on six to 10 projects in London, over 10 years.
In May, The Collective made a number of major changes to its leadership, in a bid to focus on development of consented schemes. Merchant moved to chairman, former executive director James Penfold left the business and US-based Simon Koster was appointed chief executive.
The company has continued to expand in London over the past year, securing consents despite financial troubles. The directors had been pursuing a company sale amid mounting debt, following delays in development and reduced income from operational assets as occupancy slumped during the pandemic.
The two companies are yet to file annual results for the year ended March 2020. However, an addendum to the 2019 filing made public in November 2020, highlights problems for the developer caused by Covid-19. In order to continue trading the company said it was reliant on financial support from parent company The Collective Group, which was in the process of raising capital and sought a company sale.
While a number of funds, build-to-rent developers and also hotels groups where understood to have circled the acquisition, no party committed to buying the company, resulting in the administration.
The Collective has secured an agreement with key stakeholders at the two UK sites to continue operating at usual. All assets outside of the UK, which are held in separate entities, remain under the control of their directors and do not form part of the administration.
The operating company has 62 employees. Administrators confirmed that while there will be no immediate redundancies, there will likely be redundancies in coming weeks.
Matthew Callaghan, a senior managing director at FTI Consulting and one of the joint administrators, said: “It is incredibly disappointing that a sale of the Group has not been achieved, however, we are pleased to announce an agreement has been reached that ensures continuity at the operating sites.
“We will continue to work with the various stakeholders to ensure a smooth transition whilst we assess the potential options for the Group and support the impacted employees through this difficult period.”
To send feedback, e-mail emma.rosser@eg.co.uk or tweet @EmmaARosser or @EGPropertyNews
