From The Ashes: Former Collective Directors To Build Out Schemes Of Collapsed Firm

Some of the former directors of collapsed co-living firm The Collective have set up a new development company to build out some of their former employer’s schemes. 

Collective Chief Operating Officer Neil McLeod and partners Dom Butler and Russ Beresford have set up Halcyon, CoStar reported. 

The new firm will take on three projects that were being constructed by The Collective in its role as developer for the COLIV fund, launched by DTZ Investment Management to build up a UK co-living portfolio valued at more than £600M. The schemes the fund lined up included 1,800 beds.

Halcyon will be developing a 222-room development in Harrow, a 315-room project in Earlsfield and a 270-room project in Battersea on behalf of DTZ Investors and the fund’s investors, CoStar said. All three schemes are due to launch in 2022 or 2023. 

Four Collective employees, Associate Director of Development Nik Dyer, Associate Director of Construction Kieran Devenish, Senior Development Manager James Knight and Head of Planning Harry Manley, have also joined the new business. 

The appointment is one of the first steps in the unravelling of The Collective’s portfolio. Last month, partners from FTI Consulting were appointed administrators to The Collective (Living) and The Collective (Living) Group, the companies that ultimately managed the portfolio of operational co-living schemes and development projects. 

It has three operational schemes, in Old Oak Common and Canary Wharf in London and in Long Island City in the U.S., which are being managed by the administrators and remain open. 

A portfolio of six of The Collective’s assets, almost certainly including those already open, are set to be taken over by lenders to the company. One of those lenders, GCP Asset-Backed Income Fund, gave insight into why The Collective hit the rocks in its half-year results at the end of last month.

“In May 2021, our loan to a co-living developer and operator breached a liquidity covenant, leading to the co-living group appointing a large investment bank to run a sales process,” GCP said. “This was considered the optimal process for the lenders due to the upcoming working capital requirements of the co‑living group, principally as a result of their large development pipeline.”

Initial offers were received at the end of June 2021, which informed the increased discount rate adjustment at this time and the fair value, GCP said. A preferred bidder was appointed at the end of July at the same price point as the initial bids. But the preferred bidder was unable to agree a business plan with some of The Collective's senior funders and co‑investors. This led to them withdrawing from the process. The lending consortium considered a number of other bids for the co-living group. 

GCP said the most deliverable recovery arose through a credit bid targeting six of the co-living group's most attractive assets. The bid was formulated with a group that is experienced in the development and operation of student accommodation and co-living assets, it said, adding it was basing its assumed recovery on a conservative view of the sales value of the assets. It noted lenders have security over other assets, which could also be sold.