Eight Quarters properties and two other limited liability companies filed for Chapter 7 bankruptcy last week. The eight property LLC’s located in New York City, Washington, D.C., Philadelphia, and Chicago were all part of Quarters’ US expansion that started in early 2019.
Quarters, which is a co-living brand of German-based Medici, started in 2012 as a co-living concept like the co-working concept we have seen boom in the United States over the past few years. The company master-leases properties from apartment building owners and then rents them out as co-living spaces where people can rent furnished rooms for various amounts of time ranging from 3 months to year.
Globally, Quarters had 5,000 rooms as part of their program with plans to grow to 9,000 in the near future. At the end of 2020, their website claimed to have 3,000 rooms in which only 5% were vacant and another 1,500 under development. This is all coming after numerous rounds of serious fundraising that raised $300M in 2019 according to The Real Deal.
Chapter 7 bankruptcy is the liquidation of non-exempt properties and the distribution of proceeds to creditors according to uscourts.gov and will cause all of these entities to sell off properties and end their leases in the U.S.
Out of the 10 LLC’s that filed, two of them had yet to start leasing units to the public in Philadelphia, PA and Brooklyn, NY while the other eight had a total of at least 450 rooms, but the occupancy of these spaces is unknown at this time.
This filing is joining a long list of real estate companies that have hit struggles during the COVID-19 pandemic and it will not be the last we see. It has been 10 months since this pandemic hit the United States and the longevity was not something that anyone was prepared for including companies making major expansions such as Quarters.
It is unclear what the future will hold for Quarters in the U.S. and globally, but as the real estate industry is trying to recover, we will have to wait and see how Quarters turns out.