‘Purpose-built co-living’

A segment of the residential sector that Ong is interested in is co-living. On June 24, fund management platform 32 Real Estate (32RE) and an associate company of SLB subscribed to a $150 million equity in a joint venture with Hong Kong-based Weave Co-Living, to acquire, develop, refurbish and operate co-living and rental accommodation assets in Singapore under Weave or its affiliated brands.

Weave has an 80% stake in the joint venture, with 32RE holding the balance. While Weave will be responsible for the day-to-day operations of the co-living assets in Singapore, 32RE, given its local market knowledge and network, will be instrumental in acquiring suitable assets.

“We see co-living as a subset of the residential asset class,” says Jeremy Choy, CEO of 32RE. “It’s very difficult for a foreign corporate buyer to invest in the residential sector. That’s why we are looking at hotels, serviced apartments and properties with commercial zoning that foreigners can buy, and converting them into co-living assets.” This is because foreign corporate entities buying residential assets will be subjected to a 25% additional buyer’s stamp duty and the borrowing limit has been capped at 15% loan-to-value ratio.

According to Choy, 32RE is adopting a “value-add” strategy rather than pursuing a development or redevelopment project simply because it will take two to three years to complete, which is “a bit too long”. He says: “We are looking at acquiring existing assets, refurbishing and repositioning them, and bringing the Weave product to the Singapore market in six to nine months.”

What Covid-19 has shown is that co-living assets have to be “purpose-built”, says SLB’s Ong. While there is a need for private space and safe distancing, a lot of people in big cities have to deal with loneliness, especially those who are new to the city, he says. “So we still need to cater for the needs of these residents, in terms of communal spaces for work, recreation and social interaction with other residents,” adds Ong. Incidentally, SLB has a 33.33% stake in 32RE (see story on P18, “New property fund manager 32RE plans to focus on co-living, HNW investors and family offices”).