Warburg Pincus-backed Weave Co-living has completed the acquisition of its second property in Hong Kong, with this latest investment coming nine months after the company opened its first location next to Kowloon’s Prince Edward MTR station.
The new property, located in the city’s Hung Hom’s district, will include 100 bedrooms on 20,000 square feet (1,858 square metres) of gross leasable area, according to a Weave representative.
The company declined to disclose the price of the acquisition or to name the seller of the property, but sources familiar with the deal say it was acquired at a significant discount from the market value from a local “Hong Kong business family.”
All the Co-Living Bells and Whistles
Weave, which emphasises maintaining a consistent experience for residents by owning and operating its own facilities, says that the new property will include extensive shared amenities including kitchens, laundry rooms, a game area, living room, and a gym spread over two floors. Its Prince Edward property, located on 36 Boundary street, has 6,000 square feet of shared space spread over three rooms.
According to data from Hong Kong brokerage Midland Realty, the most recent transaction in Hung Hom over 20,000 square feet was the sale of the Chase Gold Tower for HK$220 million ($10,062 per square foot) in May of last year.
Last year, Weave founder and CEO Sachin Doshi had announced the goal of building a portfolio of 10,000 bedrooms across Asia’s major cities by 2023.
Aiming for Hong Kong’s Mid-Market
Rents at the new property have not yet been made public, however, prices at its first location — where rooms range from 100 to 130 square feet in size — start at HK$7,200, inclusive of Internet and utilities. The company targets millennials and young professionals who want high standard accommodation but find it hard to afford an independent apartment, Weave founder Sachin Doshi has said.
That price tag puts Weave squarely in the middle of Hong Kong’s co-living market where at least 15 operators charge anywhere from HK$2,800 to HK$20,500 per month for rooms, with the higher-end options being comparable to the city’s average HK$20,000 apartment rent, according to data compiled by the South China Morning Post.
At its mid-range price point, Weave achieved 95 percent occupancy at its first building within three months of opening, after receiving 1,000 applications for accommodation, according to the company.
More Than a Management Platform
Unlike operators like co-living operators which have expanded quickly by acting as intermediaries between landlords and tenants, or by leasing properties that they later manage, Weave has focused on owning the assets it leases to tenants.
“Many of them (co-living operators) chase scale through leasehold and management-only models, and this is also due to the lack of access to capital to acquire real estate,” according to Weave.
In November, Doshi received a $181 million cash injection from New York-based Warburg Pincus, which has an option to invest up to $413.5 million in the company.
‘Ownership allows us to control all aspects of our service including design, operations, and service delivery. Furthermore, we can give our residents much greater certainty of the quality of the physical real estate which isn’t always possible in leased properties,” the company added.
Before founding Weave, Doshi had served as APAC head of real estate for Dutch pension fund manager APG, and the private equity veteran set up real estate investment firm Emerald Lake, at the same time that he established Weave, and used that vehicle to raises $60 million to clinch the company’s first property.
Doshi and Weave may be open to pursuing growth avenues other than developing its own facilities in order to achieve its growth targets. Sources say the company is well positioned to capitalize on “consolidation opportunities” as more players get crowd into the co-living market.