SINGAPORE (EDGEPROP) - Homegrown start-up and co-living player The Assembly Place (TAP) announced on Nov 9 that it has raised $5.55 million in a seed funding round, led by Eric Low See Ching. Low is the deputy CEO of Singapore-listed property group Oxley Holdings and its second biggest shareholder with a 28.13% stake.

Read also: The Assembly Place ventures into short stays and co-working

Besides Low, who is the cornerstone investor, there are more than 10 other angel investors in this funding round, many of whom are prominent figures in the real estate sector too. They include Kemmy Tan, CEO of M+S, a joint venture between Malaysia’s Khazanah Nasional and Singapore’s Temasek Holdings; Ismail Gafoor, CEO of Singapore’s biggest property agency PropNex; Wendy Tang, group managing director of international property consultancy Knight Frank; Bruce Lye and Ken Low, managing partners of SRI; as well as Shaun Poh, executive director of capital markets, Cushman & Wakefield.

Other investors include entrepreneurs such as Dennis Goh, co-founder and executive chairman of finance platform Lyte Ventures; and Sean Tan, group legal adviser for Hong Kong-listed building technology company, Technovator International, and director of True Group, one of Asia’s largest fitness and wellness groups.

The seed funding will allow TAP to accelerate its growth, further increase its market share in the co-living space and develop its technology platform, says Eugene Lim, CEO and founder of TAP. Lim was director of marketing and sales at Oxley Holdings for 5 1/2 years before leaving in July to focus wholly on TAP.

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New to fund-raising, Lim only started approaching his contacts about a month ago, he says. “Many of them just wanted to catch up to find out how I was doing, since I had left Oxley and started my own business midway through the pandemic,” says Lim. “I was pleasantly surprised and touched that 90% of those I approached believed in me and trusted me enough to invest in the business.”

Oxley’s Low is not just a cornerstone investor, he is chairman of TAP’s newly appointed board of advisers. The other investors who are part of the board are Tan of M+S, Knight Frank’s Tang and Lyte Venture’s Goh.

Low is an early backer of TAP, having put some of his personal assets in its portfolio of co-living spaces. He estimates that after deducting the property management fees, and excluding the capital expenditure that went into upgrading these properties, his yields on those same assets have increased by  “more than 30%”. He adds: “We like the way Eugene has positioned the firm as an asset-light operator, unlike other co-living players that are taking up straight leases.”

He believes TAP’s business could be scaled up quite quickly too. “The environment is right as the younger generation is very open to leasing, and doesn’t like long-term commitments,” he observes. “Co-living is a great option for them.”

‘Social experiment’ to asset enhancement

TAP’s business started off purely from an investment perspective and as a “social experiment”, says Lim. The first asset, secured in May 2019, was a house at Jalan Elok, just off Mount Elizabeth. The owner, Lim’s friend, had related to him how difficult it was to rent out his house, even at the asking rent of $6,000 a month. Lim saw the opportunity to enhance the asset. He negotiated with his friend for a monthly rent of $5,500, and spent some of his own money to renovate the space. When it was completed, all six rooms in the house were leased out within two weeks.

From those six rooms at the house on Jalan Elok, TAP now has more than 350 rooms across Singapore and another 200 rooms in the pipeline. About 95% of the rooms in TAP’s portfolio are under a 5+5 year management contract with the property owner.

TAP currently manages more than $250 million worth of assets, mostly owned by high-net-worth individuals and family offices. Any asset enhancements and capital expenditure in fitting out the properties as purpose-built, co-living spaces will be borne by the property owner, allowing TAP to position itself as “an asset-light co-living operator”.

In return, TAP has been able to show these asset owners higher-than-average returns compared to the straight lease model. “Generally, residential yields are not great, in the 2.5% to 3% range,” says Lim. “But in the course of the past 2½ years, we have shown that co-living as a lease management strategy can provide an uplift in rental yields of these assets to about 4% to 5.5%.”

Such returns have convinced more asset owners to come onboard. TAP announced on Aug 9 that it had secured four more buildings under a 5+5 year management contract. One of the key assets will be a 171-bed, co-living hostel at 25A Perak Road. It is a refurbishment of the former Footprints Hostel. The other three assets will be repositioned as a mix of serviced apartments and residential units. These properties are located at 3 Tank Road, 15 Penhas Road and 272 East Coast Road. The four assets will increase TAP’s portfolio to 550 rooms across 16 purpose-built co-living assets, with the firm on track to hit 1,000 rooms by 2Q2022, notes Lim.

As a multiple asset owner himself and a real estate veteran, PropNex’s Gafoor saw the potential of the business immediately. “TAP’s business definitely caught my attention,” he says. He saw how it enhanced the value of the assets of property owners. Beyond the concept, “I like the fact that Eugene Lim is someone who makes sure he gets things done once he sets his mind to it”, he adds.

Likewise, SRI’s Lye is convinced by Lim’s leadership, having known him since the latter was at Knight Frank. About 1½ years ago, Lye had introduced some of his high-net-worth clients to Lim. “They own entire blocks of buildings,” he relates. And Lim successfully repositioned the assets and enhanced their yields.

Changing trends

Lye also sees the trend of Singaporean millennials and even the Generations X and Y moving out of their parental homes. Typically in Singapore, most people stayed with their parents until they got married. “But with the pandemic and WFH (working from home), many want to move out and have their own place,” he says. Most choose to rent in a Central location, to be close to amenities, entertainment areas and their workplace. “They may return to their parents’ home on weekends,” he adds. “But most are happy to have their own space. This trend is going to continue.”

As such, he believes TAP’s market share of the business is likely to see continued growth. “It will probably be a market leader in the co-living space,” says Lye. “I believe it will be a unicorn one day.”

Property management and renting out rooms in a residential property is a traditional real estate business, says Knight Frank’s Tang. But Lim managed to give it a new twist with his co-living concept, she notes. She likes the fact that Lim and his team “are able to constantly adapt and innovate”.

Cushman & Wakefield’s Poh had initially thought that co-living may not work in Singapore due to the high homeownership rate. “It could work in cities like Hong Kong and major cities in Japan where apartments are small, and most people are used to renting,” he says.

However, after listening to TAP’s business model, Poh became convinced that it caters to an underserved niche – “the young, entry-level or mid-tier, white-collar executives from Malaysia and other foreign countries who come to Singapore to work”. He explains: “They make up the sandwiched group in the $3,000 to $5,000 income bracket that have problem finding affordable accommodation, especially if they are renting a room.”

Lim saw the need for such affordable rental accommodation nine years ago. It was when he was head of project marketing at Knight Frank. One of his colleagues, who is Malaysian, used to arrive at work in rumpled clothes every day. Lim, who is always well-groomed, had enquired about the state of his colleague’s wardrobe. That was when he learnt of his colleague’s Harry Potter-style accommodation: a bomb shelter in a condominium unit which he paid a monthly rent of $500 to stay in. Prior to that, he had rented the utility room of a public housing flat.

Affordable accommodation – offering space and privacy

With TAP, Lim is able to provide the kind of accommodation that his former Malaysian colleague would have wanted to live in. In fact, TAP’s largest and most popular property, Mill@32 at Lorong 32 Geylang, has attracted those in their early 20s, a majority of whom are Malaysian tenants, observes Lim. It has 150 rooms, and rental rates starting from $1,200 a month for a room with a shared bathroom.

One such resident is James Wong, a music teacher with a pre-school group in Singapore. A Malaysian, Wong moved to Mill@32 with his girlfriend in August last year. He had initially signed up for three months, then renewed it for a year. He intends to recontract for another year.

“The thing I like most are the interiors, because everything is new,” he says. “And we have freedom, unlike the past, when we were renting a room in an HDB flat. The landlord had restrictions on the use of the air-conditioning. We were only allowed to turn it on from 11pm to 7am.”

In the past, the landlord of the HDB flat did not allow cooking either. Now, Wong and his girlfriend can enjoy the air-conditioning round-the-clock and can cook in the communal kitchen too. (Find HDB flats for rent or sale with our Singapore HDB directory)

Vienna Le, a Vietnamese data analyst with an advertising agency, came to Singapore from Ho Chi Minh City in September last year. Having done some research before she arrived, she felt co-living was the best option for her as it offered short-term leases of three to six months, she says.

When Le and her husband arrived in Singapore, they checked out many of the co-living spaces – Cove, Dash Living and Hmlet. What she liked about TAP was that the actual property looked exactly like the one listed on the website. “I still remember the first moment I stepped into the premises, everything looked brand new, like stepping into a 3- or 4-star hotel,” she recounts. “You can even smell the newness of the space.”

Le says she would strongly advise people who are new to Singapore to follow in her footsteps – to stay in a co-living space first. “Dealing with co-living operators is always easier, there is someone to take care of things for you, all you need to do is to send a text,” she says. “And I can literally just move in with my luggage. I don’t even need to buy cutlery. It’s all provided.”

Cushman & Wakefield’s Poh believes Lim has found a good niche. “Given [Eugene’s] success, there will be more competition in that space, but he should be able to maintain his lead given that he started early and has strong backers,” he says.

‘Pay-as-you-go’ model

Singaporeans whose new homes have been delayed by Covid-related disruption are also finding co-living an ideal stop-gap measure. Kim Chuan, who works in tech at Amazon, is one such homeowner. “My condo at Parc Botannia got delayed twice,” says Kim. (Discover insightful data of any Singapore condominium with our condo directory)

The 35-year-old is staying at TAP’s co-living space at 96 Owen Road until he gets his keys to the new apartment at Parc Botannia sometime next year. He likes the fact that 96 Owen Road is pet-friendly, and he can bring his dog with him to the co-living space. He likes the privacy of the space, and the opportunity to meet others in the communal area if he wishes.

One of the parallels True Group’s Tan drew from the fitness business was that the people no longer want to be tied down to fixed monthly memberships of two to three years. “In the last few years, you’ve seen boutique gyms come in and adopt a pay-as-you-go model, and young people like that flexibility,” he says. “For TAP, that’s the way to go.”

Tan believes co-living is a business that is poised to “explode”. In the early months of the pandemic, co-living operators were concerned as occupancy had been affected when borders closed. This was because they predominantly catered to the expatriates.

Even Lim has seen a change in demographics. In the early days, about 90% of his members were foreigners, with Singaporeans only making up 10%. Today, Singaporeans make up 30% of the members of TAP.

The business has certainly gained traction. “While being asset-light is key, it has achieved a high retention rate too,” notes M+S’ Tan. “The programming and partnerships with other service providers to cater to the members have helped maintain this high retention rate.”

Lyte Ventures’ Goh likes the fact that TAP has “built a great brand very quickly, with many of their users rating them highly”. “I know how tough it is to build good brands,” says Goh, who co-founded social media platform Hungrygowhere in 2006, and financial platform Lyte Ventures in 2017.

Given what TAP has achieved in such a short space of time and the foundation it has built, “I have great confidence in their ability to scale up rapidly when the time comes”, adds Goh.

Lim’s ambition is for TAP to be a dominant player not just in Singapore, but in the region as well, he says.

Check out the latest listings near Penhas Road, Lorong 32 Geylang, 96 Owen Road, Cove, Mill@32 

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