Keppel-backed Cove takes over Hmlet's abandoned Lumiere units
Co-living operator Cove has assumed management control of some 30 units in residential apartment building Lumiere. These units had been given up by struggling rival Hmlet in a bid to cut costs.
In November 2020, Hmlet walked out of a five-year master lease with Lumiere's landlord BS Shenton - turning its back on some 43 units.
Luca Bregoli, co-founder and chief operating officer of Cove, told The Business Times (BT) that Cove has taken over the former Hmlet flagship property at Lumiere on "entirely new terms".
This includes a revenue-sharing component on top of a fixed base rent. The new lease terms have a "performance-based component" weaved in. This means landlords' earnings will vary based on how well the units perform, said co-founder and chief marketing officer Sophie Jokelson.
"For bigger projects like this, having a more flexible arrangement is critical to making sure that Cove doesn't take on too much of the risk on our own," said Ms Jokelson, declining to disclose specifics of the deal.
Potential buyers can still purchase the units managed by Cove from BS Shenton, and will be guaranteed a revenue stream.
Units managed by Cove include a mix of studios and one- and two-bedroom apartments. A check by BT showed that rooms in Lumiere that are listed on Cove start at S$1,800 per month.
Cove, which now manages about 1,000 rooms across Singapore and Indonesia, has raised about US$6.8 million in equity funding to date. Investors include Keppel Land, the property arm of Keppel Corporation; as well as Idinvest Partners, a unit of private equity firm Eurazeo.
The deal comes as occupancy rates have picked up from a lull during the "circuit breaker" phase. Ms Jokelson said Cove's average occupancy rate stands at 92 per cent, up from around 80 per cent a year earlier. The average length of stay is nine months.
These numbers might fluctuate, depending on demand. But Ms Jokelson said Cove plans to be here for the long term, and the key to sustainability is making sure the business is not biting off more than it can chew.
"We've always been very focused on doing deals with good unit economics," said Ms Jokelson. "We understand that no matter how desirable our product is, if the fundamentals of the deals that we have with our landlords are not good, we will not be successful.
"We're obviously a fast-growing startup and I think sometimes fast-growth startups can get carried away, to grow at any expense, and not pay enough attention to some of the details. At Cove, we've worked really hard to make sure we don't fall into that trap. We make sure that every property we take on makes sense."
Cove is now looking to tap local renters to increase its reach. Ms Jokelson claimed younger locals are increasingly looking at co-living options in the city-state, and the pool of locals as occupants has been growing organically. About 175 rooms - or 35 per cent - out of its 500 rooms in Singapore are now taken up by locals, up from just 5 per cent in 2020.
"It's a bit of an unmet market need. We're now looking into (engaging the local audience) much more and understanding whether we can grow the properties to suit their needs better," she added.
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