Wednesday 23 October 2019

Neumann's side bet Selina seeks $500m real estate war chest

Firm working with Bank of America to build property fund for US

Side bet: WeWork co-founder Adam Neumann is among Selina’s prominent backers. The firm provides travellers with co-working spaces, accommodation and leisure
Side bet: WeWork co-founder Adam Neumann is among Selina’s prominent backers. The firm provides travellers with co-working spaces, accommodation and leisure

Gillian Tan

Adam Neumann's stint as WeWork's chief ended last month as the office-sharing venture put its initial public offering on pause - but one of his many side bets is building a war chest for a rapid expansion.

Selina, which provides travellers with co-working spaces, accommodation and leisure activities, is working with Bank of America to raise a $500m (€456m) investment fund dedicated to US real estate, according to its president Yoav Gery.

Mr Neumann is among the firm's more prominent backers, which also include Len Blavatnik's Access Industries and Tom Barrack's Colony Latam Partners.

With debt, the new vehicle will wield roughly $1bn to buy or lease US real estate and cover expenses such as the cost of converting properties, said Mr Gery, who previously held roles at WeWork, Morgans Hotel Group and Marriott International.

It's an idea similar to WeWork's real estate investment platform ARK, which tapped institutional investors to buy office buildings in which the company is a tenant.

To be sure, the two companies focus on different categories. In contrast to WeWork's tony offices, Selina pitches a modern bohemian lifestyle to customers it calls "digital nomads", surfers and adventurers.

Its website has pictures of apartments and shared offices, but also seaside shelters and a tree house.

Selina was using its own money to shoulder the expense of setting up new properties when executives "realised that there's a better, asset-light, way to fund growth at essentially, no cost to us," Mr Gery said.

"There's a big opportunity to turn distressed real estate into relevant, revenue-generating real estate, and to do it at scale."

Selina's valuation reached $850m (€775m) in April as it raised $100m from Access Industries, Peru's Grupo Wiese and Colony Latam Partners, which acquired Abraaj Group's private equity platform in Latin America. Mr Neumann and Abraaj previously invested in a $95m round in April 2018.

The startup is seeking an executive to run the new vehicle and aims to finish the fundraising by the first half of 2020.

In the US, the firm focuses on hubs such as Miami, New York and San Diego, and has plans to expand across cities including Los Angeles, Portland, Seattle, Austin, Washington, New Orleans and Chicago.

It also aims to open "off-the-grid" locations nearby - such as Woodstock, New York - that can host company retreats.

Internationally, Selina leans on partners to buy or lease real estate and fund renovations. They include Grupo Patio in Chile, Ampa Real Estate in Israel and DD3 in Mexico.

It plans to keep doing so, especially in Asia, Mr Gery said.

But if the US fund performs, Selina could raise a Europe-focused fund to accelerate growth there.

The London-based company already has 54 locations in Latin America and Europe with a total of more than 12,000 beds.

It aims to offer 130,000 beds across more than 400 locations by 2023, Mr Gery said.

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