Common’s CEO Brad Hargreaves (right) and Starcity’s co-founder and CEO Jon Dishotsky (Photos via iStock, General Assembly)
Consolidation of the co-living market is accelerating.
Common, among the fastest-growing co-living landlords, has reached an agreement with its former rival Starcity to take over management of the bulk of Starcity’s portfolio — about 7,500 units including both operating and pipeline units — around the globe, Common confirmed with The Real Deal. The acquisition came only several months after Starcity’s acquisition of Ollie, another co-living startup.
New York-based Common currently manages about 6,400 units, including both co-living units and traditional apartments. Taking all the pipeline units and the Starcity portfolio into consideration, Common’s footprint will reach 33,000-plus units. Terms of the acquisition deal were not disclosed.
Co-living facilities have proliferated in the past few years as the communal lifestyle — in which residents get a private, furnished bedroom with shared common areas — gained popularity. Tenants chose co-living facilities as an alternative to traditional rental apartments that became too expensive for many. Consolidation was already happening before the pandemic, and when tenants vacated their communal homes in the health crisis, co-living startups on weak financial footing struggled to survive.
“It’s been a tough year in many ways for the co-living industry,” said Common’s CEO Brad Hargreaves, noting that the occupancy rate of Common’s co-living units fell below 80 percent at one point in the pandemic, though the rate has recovered to 90-plus percent in recent months.
San Francisco-based Starcity had prided itself as a developer and operator of co-living facilities, and when the economy was humming, investors flocked to the startup’s creative projects. But it became clear that the business model was not sustainable in the pandemic-driven downturn, said Starcity’s co-founder and CEO Jon Dishotsky. Dishotsky and a majority of Starcity’s building staff will join Common in the acquisition deal.
Hargreaves said Starcity’s heavy presence in San Francisco and Los Angeles might have also made Starcity’s operation challenging.
“San Francisco has gotten hit the hardest of any city,” he said. “They built some extraordinary assets, and we’re excited to take over their management contracts.”
Common came out of the pandemic relatively unscathed for a number of reasons, including its focus as a designer and operator, rather than a developer, of co-living facilities. When operating, Common uses management agreements with landlords rather than traditional leases. The startup’s effort to diversify into multifamily property management beyond co-living has also helped weather the storm, Hargreaves said.
In addition, Common’s capital structure gave the firm room to breathe. In September, the company raised a $50 million round of Series D funding led by Kinnevik with participation from existing investors Maveron, 8VC and Norwest Venture Partners, bringing its total funding to more than $113 million.
Until late 2020, Starcity was on the other side of consolidation, acquiring Ollie’s technology, assets and management contracts. As part of the deal, Starcity’s management contracts formerly held by Ollie, including the one for Carmel Place in Kips Bay in New York City, will be taken over by Common. Separately, Common has signed an agreement with Simon Baron Development’s co-living facility in Long Island City, which was previously operated by Ollie.
Another co-living casualty of the pandemic was Quarters, a subsidiary of Germany-based Medici Living Group. The company planned to open 1,500 co-living units in the U.S. Instead, entities with ties to Quarters filed for Chapter 7 bankruptcy in January, ceasing operation and liquidating all assets to repay creditors.
