European co-living company Cohabs plans $50M NYC expansion
Belgium-based company’s model has a twist: they own their buildings
A European co-living company is making a push to scoop up properties in New York City.
Since the Belgium-based firm, Cohabs, closed on €58 million, or $70.2 million, in funding this spring, the firm has started scouring New York for small vacant buildings that could be outfitted as co-living properties with between 10 to 30 bedrooms, according to its executives.
The company’s portfolio has 760 bedrooms, 480 of which are operational in Brussels, Paris and New York. In the latter city, Cohabs owns three buildings, two in Crown Heights and another building under development in Harlem. In addition to growing its U.S. business, the firm is also expanding into Madrid.
CEO Youri Dauber said Cohabs is ready to spend up to $50 million on a New York shopping spree.
Buying properties is a unique feature of Cohabs’ model. Most co-living companies sign master-lease agreements with landlords to redesign their properties and then rent them out to tenants by the bedroom.
But as consolidation speeds up in the co-living market, Dauber said he believes their approach of owning the buildings outright is prudent.
“The master lease model is a real problem. Because as you can see, when you have a drop in rents you don’t have enough to pay the owner,” he said.
“We believe that owning the asset is more capital intensive but it makes us more capable of doing great things within the asset… We can do whatever we want if it fits in the financial plan,” Dauber said.
Since the pandemic began, a number of co-living companies have folded or been bought by competitors. Quarters, a Germany-based co-living company, saw its $300 million expansion into the U.S. end in bankruptcy earlier this year. Meanwhile, a long-time co-living firm Common has scooped up 7,500 bedrooms from the portfolio of San Francisco-based operator Starcity.
Cohabs is reaping some of the rewards from the collapse of would-be rivals. Quarters’ former head of real estate, James Grasso, has joined Cohabs to work on its U.S. growth.
What differentiates Cohabs from Quarters to Dauber is that, in addition to their strategy of owning buildings outright, Cohabs doesn’t count any private equity firms among its investors. Instead Cohabs lead backers are institutional investors, including AG Real Estate, which owns Financial District towers, 70 Pine Street and 20 Exchange Place.
“They tend to be very down-to-earth. They say go slow, but go well. So make sure the business model is strong,” said Dauber. “Because we’re not being pushed very, very hard by our investors, we have the time to do it well and, we believe, better than others.”
Grasso will be working alongside managing director Daniel Clark, Cohabs’ first full-time employee previously led operations at short-term rental company onefinestay, which was sold to AccorHotels for $170 million in 2016.