The Collective on verge of administration

George Sell George Sell Uploaded 15 September 2021


UK: Coliving pioneer The Collective looks set to enter adminstration, after efforts to find a buyer for the company proved unsuccessful.

The Collective, which was founded by Reza Merchant, appointed Credit Suisse Group AG in June this year to explore options for a full or partial sale. Merchant, who still holds a substantial equity stake in the company, stepped down as CEO in May, appointing former JDS Development Group executive Simon Koster to the role.

But having failed to attract a buyer, the company is now reportedly on the brink of administration, thanks to a combination of debt, high operational costs and low occupancy. It has 1,623 operating units but a hugely ambitious development pipeline of nearly 7,000 units across the UK, US, Ireland and Germany.

It has hired FTI Consulting to guide it through the administration process, according to React News, which is expected to result in private equity investors buying various elements and assets.

The Collective has a £140 million loan from a group led by Deutsche Bank that has already been restructured several times. In 2018, the company bought its Old Oak Common development in north-west London. Previously, the company had owned a 25 per cent stake in the scheme, with the other 75 per cent owned by a group of Singaporean and UK private investors. The Collective now owns the scheme outright.

The owners had originally agreed to sell the building to Red Door Ventures, the investment vehicle of the London Borough of Newham, but the sale fell through. Deutsche Bank provided senior debt and Catalina Re, which is part-owned by Apollo, provided mezzanine debt, to fund The Collective's buyout.

Some of the London developments in The Collective's pipeline are being forward funded by COLIV, an independent fund managed by DTZ Investors, which has the backing of several major UK pension funds. A further London site has been backed to the tune of £28.5 million by Cheyne Capital.

If The Collective does cease trading, owners will be looking for other operators for their assets. The most likely candidate would appear to be Common, which has acquired some of its former rivals over the last year and has a more diversified portfolio that is not completely reliant on coliving.

Common's managing director of real estate Brian Lee is based in London and is actively pursuing opportunities in Europe. Click here to watch an Urban Living webinar from June of this year, in which Lee shares his thoughts on growing the brand in Europe.


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