Major JV move into co-living sector by Corestate, Medici

Frankfurt-listed Corestate Capital Holding and Berlin-based co-living service provider Medici Living have agreed to invest €1bn of equity and debt in the fast-growing European co-living sector over the next three to five years.

The parties will work together on acquisitions, conception and management of the properties. The cooperation marks the largest investment into the emerging co-living asset class worldwide to date.

'This investment is the breakthrough for co-living in Europe,' said Medici Living founder and CEO Gunther Schmidt. He believes that the new asset class has even greater potential than the already thriving co-working sector. 'The residential market is significantly larger than that for office assets. We want to become the WeWork of co-living,' he added.

WeWork, comfortably the dominant player in the global co-working office market, is – according to US business portal Small Business Labs – forecast to grow from approximately 15,000 co-working spaces in 2017 to 3.8 million by 2020 and 5.1 million by 2022.

In addition to Medici Living’s current European target markets of Germany, the UK and the Netherlands, the new investment programme will target Austria, Switzerland, Spain and Poland.

The focus will be on cities with more than 500,000 inhabitants and properties – existing as well as new-build – with an investment volume of between €20m and €60m. The partners expect the programme to include around 35 assets in total, which the Medici Living Group will operate under the Quarters brand, which mainly targets young professionals with smartly designed accommodation, including smart technology, spacious communal areas and regular events. Quarters operates co-living spaces in several major markets, including New York, Amsterdam and Berlin.

Under the agreement, which is exclusive, the €25bn Corestate will take care of investment, project development, financing, asset and fund management while the Medici Living Group will be responsible for the conceptual design and operation of the properties. Already the largest co-living service provider in Europe, Medici will add an additional 6,000 rooms to its current portfolio of 1,800 rooms.

As we reported in the October issue of REFIRE, Corestate founder Ralph Winter, who still holds 17% of Corestate’s shares, invested via his family holding company W5 in Quarters, and joined the board of the company.

Michael Bütter, CEO of Corestate said: 'Urbanisation, young people’s desire for community as well as the opportunity to live and work in different cities, are boosting demand for communal residential space. Investment in the co-living segment is characterised by the low risk profile of residential property paired, however, with higher yield expectations.

Thomas Landschreiber, CIO and co-founder of Corestate, added: "Together with Medici we want to play a leading role in shaping the co-living market in Europe. Co-living properties optimally complement our current product range in the micro-living sector. It is a new, rapidly growing residential segment that covers millennials’ rental requirements.”

"These millenials are looking to exchange ideas with like-minded people in a modern living space and experience community, no matter in which metropolis they are currently working. Our investors will also benefit from this trend. Through us, they have the opportunity to invest in a unique product range in the micro-living sector at a European level.”