||Raphael Sidelsky ’99, W5 Group
||Jason Epstein, Sonder
||Britt Zaffir, Kin
||Andy Levin, Ollie
By Musashi Liu ’20 and Justine Murphy ’21
The Co-Living and Beyond Panel at the 2019 Columbia Business School Real Estate Symposium focused on the attractive opportunities that co-living and short-term rentals provide to renters, travelers and investors within the multifamily and hospitality space. Raphael Sidelsky ’99 is the Chief Investment Officer for Real Estate at W5 Group, which is a leading investor in these sectors including with Quarters, the world’s largest co-living operator. Sidelsky leveraged his experience as well as those of the panelists to explore the interesting convergence of hospitality and multifamily that is occurring due to the advent of co-living and short-term rental business models in New York, across the US and Europe.
Laying the groundwork for their dialogue, the panel began by providing perspectives on the unique differentiators between co-living and short-term rentals. Jason Epstein, Regional Director for Sonder, responsible for overseeing Sonder’s real estate growth for portions of the East Coast and Midwest, as well as lender outreach, noted Sonder’s short-term rental model of signing long-term lease agreements with hotels and multifamily developers and charging tenants on nightly basis with an average stay of four nights. Sonder units look like residential apartments but are actually built out as hotel suites. Britt Zaffir, CEO of Kin (a joint venture between Common and Tishman Speyer), the first-of-its-kind housing brand designed to meet the changing needs of modern families, discussed that co-living focuses on the traditional multifamily model for tenants and families on a twelve month lease. One of the differences from traditional multifamily is that co-living focuses on a density driven design for affordability focusing on younger adults with Kin being the only co-living company focused on families. Andy Levin, Director of Real Estate Partnerships for Ollie, who is responsible for sourcing and closing strategic partnerships, elaborated, further stating that he also sees short-term rentals catering towards working young professionals and discussed the types of projects Ollie is involved in the co-living and short-term rental space. In New York City, the definition of co-living and short-term rentals is expanding because of the need for such products, and the panelists agreed that the co-living space will continue to change and grow in the immediate future. Sidelsky mentioned that Quarters which is operating in 15 cities in Europe and the US has a co-living model focused on affordability, flexibility, community and design. Quarters provides members the ability to rent by the bedroom for 3 months or longer, provides fully furnished units and every building has a community manager and strong social and digital network.
Given the new demand in co-living, particularly in New York City, the conversation then transitioned to the nuances of the sector. Common throughout each panelist’s comments was that within co-living, there has been a drastic increase in new development in cost-cutting and new-age designs. The panelists all stressed how their companies have been truly focus on the layouts and design of these co-living and short-term rental spaces which are truly trying to embrace the idea of Live, Work, and Play. The units and common areas, and programming for tenants, are an interesting combination of home and hospitality and, some of these co-living companies, are even focused on creating specific micro-units. The space is targeted toward mid-twenty to early thirty-year olds focused on an elegant lifestyle without sacrificing aesthetics. The key is how co-living incorporates new technology into innovative designs. Additionally, as developers understand how to create new smaller spaces for less money, lenders are becoming more comfortable with underwriting the co-living and short-term rental models. Epstein, Zaffir and Levin all highlighted how their respective companies, Sonder, Kin, and Ollie, have had to educate lenders on the sector and that lenders have become sophisticated enough to start underwriting company specific leases too.
Finally, the panelists outlined the ways in which co-living and short-term rentals can outperform traditional multifamily and the hotel industry. Zaffir highlighted that co-living allows people to feel that they are in a community greater than themselves and that Kin’s specific focus on families allows people to work and live together as a community, e.g. sharing nannies among families for cost-savings. Co-living is simply an affordable and more community style environment for the open-minded tenant who is happy to share amenity and living room space with others. Meanwhile, Epstein discussed how hotel companies are too entrenched in management franchise agreements and not vertically integrated enough to have a true short-term rental platform that Sonder can provide. The panelists also discussed the business lessons that they have learned from WeWork and the co-working space in general, particularly regarding governance and avoiding unprofitable growth. All three panelists described the unique opportunity that each company is targeting and how fast the sector is growing.
Overall, the panel offered a dynamic discussion on the sub-sector. The audience walked away from the panel with a better understanding of the opportunities and the challenges of investing in co-living in the current market environment.
Musashi Liu ’20 is a second-year student at Columbia Business School and is a VP of Careers for the Real Estate Association. Prior to CBS, Musashi worked as a Senior Associate focusing on capital markets/M&A/strategy for Mill Creek Residential Trust, a vertically integrated real estate developer/investment manager/operator ranked as the 2nd largest US apartment developer. Most recently, he spearheaded Mill Creek’s $650MM M&A transaction with the Arizona State Retirement system and, in the past, has contributed to the successful completion of more than $1 billion of US, Asian, and Middle Eastern capital investments in multifamily, retail, office, and land development. He has prior experience in real estate investment banking and global foreign exchange at Bank of America Merrill Lynch and BlueGate Partners. Musashi graduated from Georgetown University, Bachelor of Arts in Chinese/Business Administration [Sidwell Friends High School], studied abroad at Minzu University in Beijing becoming fluent in Mandarin, and was a student-athlete on the Georgetown University Men's Rugby Team. He is an active member of the Urban Land Institute, the Georgetown Real Estate Finance Initiative, The Real Estate Council, and a core volunteer for Habitat for Humanity.
Justine Murphy ’21 is a first-year student at Columbia Business School and a member of the Real Estate Association. Prior to CBS, Justine worked as a Vice President at Hammond Hanlon Camp, an independent, healthcare-focused strategic advisory and investment banking firm with an emphasis on the not-for-profit sector. At Hammond Hanlon Camp, she provided transaction and analytical support to senior bankers on an extensive range of capital markets, M&A, and strategic advisory engagements. Prior to joining Hammond Hanlon Camp, Justine was an Analyst in Morgan Keegan’s Healthcare Investment Banking Group (now a subsidiary of Raymond James) where she provided capital markets, M&A and strategic advisory services to healthcare and specialty not-for-profit clients. Most recently, Justine completed a financial consulting assignment for Hospitality 3, LLC, a hotel developer based in New York, for a hotel development at the University of Chicago (estimated to open 2021). Justine graduated from Yale University, with a Bachelor of Arts in Economics [Stuyvesant High School].