Medici Living fouder and Chief Executive Gunther Schmidt

A Berlin-based co-living company has raised €1B ($1.1B) of capital to undertake what it says is the largest-ever investment in the nascent sector, as part of its plan to become “the WeWork of co-living”.

Medici Living has teamed up with Frankfurt-based Corestate Capital to buy and build as many as 35 co-living facilities in Europe — and it is planning an even larger expansion in the U.S.

The €1B will comprise equity and debt, and will be deployed in major capital cities across Europe to build up a portfolio that could total 6,000 beds. Market sources suggested the company has already raised separate equity with a different partner to invest in the U.S. and had its first new deals lined up. The U.S. capital raising in 2019 is likely to match or exceed that in Europe.

In the U.S. Medici already has two facilities in New York and one in Chicago, and as well as those cities it will be looking to buy or build co-living buildings in Boston, D.C., Denver, Philadelphia, Los Angeles, San Francisco and Austin.

The company is looking to quickly build scale and be an early mover in what it thinks will be a fast-growing sector.

“If you look at the coworking sector, there are multiple players and it is not a winner-takes-all market,” Medici founder and Chief Executive Gunther Schmidt told Bisnow. “But if you look at WeWork, it is 20 times bigger than most of its rivals, and that is because of its ability to attract massive amounts of capital the fastest.”

Courtesy: Medici Living Group

A bedroom at a Manhattan location of Quarters, a German co-living brand

“A lot of investors and companies feel they missed the train with coworking, and WeWork came in and disrupted the market. I see parallels with co-living. You have a huge housing affordability problem across the world, millennials’ behaviour has changed, and real estate is not offering them what they want. Co-living is not a winner-takes-all market either — other people will come — but whoever has the ability to attract capital the fastest will be important, and the capital we have raised is an important milestone. We want to be the biggest in PropTech and the co-living space.”

The company is looking to combine technology with affordable real estate to appeal to young professionals, Schmidt said. He said the pricing is typically 10-20% cheaper than the price of a studio apartment.

“I want to give you the ability to have a home at the click of a button on your mobile phone,” he said. “If you look at Uber, they didn’t really change the product of the taxi at all, they just created a superior interface. We have created the technology that allows you to enter your property or get the services you need through an app, and that allows us to manage our portfolio with fewer people, so it is very scaleable.”

On the company’s ambitions in the U.S., Schmidt pointed to the target of 6,000 beds in Europe and said the U.S. is a much bigger market. It hired Mark Smith from Pret A Manger in September to lead its expansion.

“If you look at what has happened with coworking, well, the residential real estate market is more than twice the size of the commercial market. Our ambition is to build the first European PropTech unicorn.”

Medici has one co-living scheme in Berlin already, and that and the new facilities targeted will be operated under its Quarters brand.

In Europe it said the focus will be on cities with populations greater than 500,000, and properties — existing as well as new-build — with an investment volume of between €20M and €60M.

“Urbanisation, young people’s desire for community as well as the opportunity to live and work in different cities, are boosting demand for communal residential space,” Corestate Chief Executive Michael Bütter said. “Investment in the co-living segment is characterised by the low risk profile of residential property paired, however, with higher yield expectations.”