Hong Kong-based co-living rental accommodation provider Weave Co-Living raised $180 million from Warburg Pincus on Monday.
The US private equity firm has the option to upsize its investment to as much as $431.5 million. Proceeds will be used to expand Weave’s business in Asian gateway cities which include Singapore, Seoul, Sydney and Tokyo. Weave has said that it intends to grow its portfolio to more than 10,000 rooms over the next five years.
Weave now leases 160 fully decorated rooms in a building in downtown Hong Kong. Before it started operations in August this year, Weave received 1,000 applications - more than six times the more than it could accommodate - for those rooms.
Warburg Pincus, which has long held portfolios in real estate and the home rental sector, remains optimistic about demand in Asia. Joseph Gagnon, managing director and head of Asia real estate for Warburg Pincus, said that Weave’s first project reached 95% of occupancy rate three months after operations began.
Weave was founded by Sachin Doshi, the former head of private real estate at APG Asset Management in Hong Kong. Doshi also founded a real estate private equity firm in Hong Kong called Emerald Lake which invested an initial $60 million in Weave last year. The money was used to purchase Weave's first property in Hong Kong and to develop its platform. As part of the transaction, Emerald Lake’s asset management and acquisition team have integrated into Weave Co-Living, Doshi told FinanceAsia.
Warburg Pincus said that the reason it chose Weave is because of the international vision of Sachin Doshi. He understands investment and had experience of real estate projects in Australia, it said. Warburg Pincus chose him on the expectation that Weave will become an international business.
The valuation for Weave is “fair” this time, according to sources in Warburg Pincus and is based on the demand and development of the sector.
Economic slowdown and currency depreciation have cooled down the real estate market in Hong Kong. CLSA analyst Nicole Wong said in August that Hong Kong house prices are likely to drop 15% over the next 12 months. UBS has a similar view. It predicts a maximum fall of 10% in Hong Kong real estate prices over the next 13 months.
But to Doshi, Hong Kong is still a perfect place to develop the home rental business. He said that it is an international city and that an open city helps to build a diverse community of residents in Weave. He wants to expand the business into more Asian cities, especially those with diverse residents and international connections.