DTZ and The Collective launch institutional co-living fund
DTZ Investors (DTZI), a specialist European real estate fund manager, and The Collective, a global co-living platform, have jointly launched an institutional large-scale co-living fund with the aim of raising total equity commitments of up to GBP650 million.
The new fund – COLIV – will seek to acquire, or forward-fund, between six and ten co-living assets in London, with a target gross asset value of GBP1 billion over the ten-year life of the fund.
DTZI will act as the investment adviser to the fund, which consists of primarily institutional capital, with The Collective acting as asset manager and property manager. The partnership provides the platform and vehicle for institutional investment in the co-living sector across London over the next ten years and is a clear signal of increasing institutional appetite and demand for large-scale co-living spaces.
The fund offers an innovative solution towards addressing London’s housing shortage by increasing the supply of an alternative and much in-demand housing typology. A heavy emphasis will be placed on positive social and environmental impact with the potential to drive down carbon emissions through the delivery of a sharing economy housing model, and the creation of buildings with ground-breaking energy performance. Social impact is a key driver for the fund with the objective of delivering tangible and meaningful impact at the neighbourhood level for each and every project, and the opportunity to increase the delivery and diversity of homes across London.
The fund has launched with GBP70 million of seed capital, with DTZI and The Collective equally committing to the GBP10 million Sponsor Co-Investment.
The fund has also announced its first acquisition with a deal to forward-fund The Collective Harrow, a new co-living destination in the London Borough of Harrow that will start on site immediately.
The Collective Harrow will comprise a nine-storey building with 222 shared living rooms, 5,000 sq ft of incubator employment space targeted at local start-up businesses, and 6,800 sq ft of world-class shared spaces including a public-facing concept dining experience, gym, library, cinema, mindfulness lounge and a ‘MasterChef’-style communal kitchen on the top floor. The Collective is development manager for The Collective Harrow, where construction is underway with completion targeted for 2021.
The fund will seek to provide investors with an attractive core-plus return, by building a portfolio of best-in-class large-scale co-living assets in Greater London over a four-year investment period. In addition to investing in operating assets, COLIV will also forward-fund developments which will be acquired with pre-agreed occupancy targets to provide stabilised cash flow to meet the fund’s income requirements.
The fund has identified a strong pipeline comprising both existing assets from The Collective, as well as new investment opportunities.
DTZ Investors’ CEO, Chris Cooper, says: “We are delighted to announce the launch of COLIV, the world’s first large-scale co-living fund in partnership with The Collective. It’s an important step in the development of our business to be leading the market in the delivery of innovative solutions to London’s housing shortage. This fund will bring forward a strong social agenda through: the buildings and places we create; the manner in which we engage with our communities and; the way in which we foster wellbeing for members.
“Co-living is an ideal response to the needs of London’s rented housing market, building on the principles of quality, convenience and community. Modern London life is a conundrum: urban living and technology have managed to create a society that is constantly connected yet alone. People and communities are being pushed apart, contributing to significant loneliness and mental health issues.
“Our aim is to have a positive impact beyond the four walls of our real estate, and in this regard, I am thrilled to have teamed up with The Collective, a business we have grown to know very well over the past few years. We have been very keen admirers of how they have pioneered this market, delivering great spaces for their members and neighbourhoods alike, while investing in the needs of their communities.”
Reza Merchant, CEO and Founder of The Collective, said: “The launch of this fund, which aims to bring GBP1 billion of institutional capital into the co-living market in London over the course of the next 10 years, marks this sector’s arrival as an institutional asset class. We are honoured to be taking the fund forward with DTZI given our shared vision and belief in creating places founded upon meaningful and tangible social and environmental impact.
“Our experience in creating, delivering and operating co-living spaces across London over the past 10 years, paired with DTZI’s deep rooted investment advisory expertise and institutional relationships, provides the foundation for a sustainable operational model that will underpin returns to investors. It also allows us to significantly grow and deliver our pipeline in London in the coming years whilst retaining long-term involvement on all of our projects.”