What remains of the co-living industry continues to consolidate, and it looks like Common might wind up one of the last companies standing.
Common has agreed to acquire the management assets of competitor Starcity, which operated around 1,000 units in California, New York and Barcelona, Spain, with over 6,000 more in its pipeline, it announced Wednesday. Common operates 6,400 units of both co-living and traditional multifamily apartments and had a further 20,000 units under agreement or in development.
While Common will bring on a significant number of Starcity employees, it is not acquiring the company on the whole. Starcity owned some real estate and had some development agreements in place that are not part of the deal.
"Starcity real estate assets are currently or soon to be on the market, and we're talking to a handful of owners looking to acquire the entire portfolio," Starcity co-founder Jon Dishotsky told Bisnow in an email Tuesday.
Though Starcity's main business model used management agreements with multifamily landlords, it did have a small number of master leases, including properties that came as part of its December acquisition of competitor Ollie. German co-living brand Quarters also used a master lease model before filing for Chapter 7 bankruptcy in January. Common doesn't do master lease deals as a rule, CEO Brad Hargreaves told Bisnow.
“Those deals will need to be restructured, and we’re making management offers to [Starcity's] partners on master-lease agreements,” Hargreaves said.
The deal came together quickly, with Dishotsky approaching Hargreaves about an acquisition in mid-May, Hargreaves said, followed by the two companies negotiating the bulk of the deal over a weekend and signing a term sheet in the first week of June, Hargreaves said.
Once the acquisition is completed, Common will have a pipeline of units in various stages of development or operational in 30 different cities. Starcity’s Barcelona locations, as well as a Madrid property that is under construction, will become Common’s first properties in Europe. Including Starcity’s properties in the fold, Common expects to have 14,000 active units under management by the end of this year.
Starcity is Common's second acquisition and first of a competitor, with its only other purchase a listing site called Skylight in 2016. Still, through a combination of Starcity's previous takeover of Ollie and competitors like Quarters, Hubhaus and Roam closing their businesses, the industry has contracted enough for at least one outlet to write co-living's eulogy.
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