Problem Definition
UrbanNest is a co-living real estate developer that has established itself as a leading operator in London over the past six years. The company currently manages 12 properties totaling 2,400 beds, with an average occupancy rate of 94% and an average monthly rent of GBP 680 per bed. UrbanNest's co-living model targets young professionals and digital nomads who value community, flexibility, and all-inclusive pricing -- combining private bedrooms with shared kitchens, co-working spaces, gyms, and curated social programming.
UrbanNest's London portfolio generates approximately GBP 18.3 million in annual revenue with EBITDA margins of 22%. The company has built a strong brand among 25-to-35-year-olds and consistently outperforms the London co-living market average on occupancy by 6 percentage points. However, the London market is becoming increasingly competitive, with three new operators entering in the past 18 months and planning permission for co-living developments tightening in several boroughs.
The CEO has secured GBP 150 million in expansion capital from a consortium of institutional investors and is evaluating entry into three new European cities within the next 36 months. The investor consortium has set clear expectations: a minimum 15% IRR over 10 years, with at least one property generating revenue within 18 months. UrbanNest's board must decide which cities to enter, what format to deploy in each (premium, mid-market, or student), and whether to build new properties, convert existing commercial buildings, or operate under management contracts with local property owners. Each entry mode carries different capital, timeline, and risk profiles -- and the GBP 150M must be allocated across all three cities.
What cities should UrbanNest enter, in what format, and through which entry mode to maximize risk-adjusted returns within its GBP 150M budget?
Additional InformationAsk for more dataHide data
Provide only when the candidate asks relevant questions:
- UrbanNest's London EBITDA margins by format: Premium 18%, Mid-Market 24%, Student 20%
- Management contracts require no capital outlay but yield only 8-12% of revenue as management fees
- Average time from site acquisition to first tenant: 14 months (conversion), 28 months (new build), 3 months (management contract)
- UrbanNest has no existing European operations, brand recognition, or local regulatory expertise
- Institutional investors expect a minimum 15% IRR on deployed capital over a 10-year horizon
- The CEO is open to a phased approach but wants at least one property operational within 18 months
- Currency exposure: revenues in EUR, debt serviced in GBP; no hedging program in place
- Co-living regulatory classification varies by city -- some treat it as residential (rent controls apply), others as commercial hospitality (more pricing freedom but higher taxes)
- UrbanNest's London tenant acquisition cost averages GBP 180 for mid-market; European markets expected to be 40-60% higher due to lack of brand awareness
- Typical co-living rents are set at approximately 60% of local one-bedroom apartment market rents, reflecting smaller private spaces offset by shared amenities
- The European co-living market grew 28% in 2024, but growth is concentrated in 5 cities that account for 65% of total beds
- Competitor landscape: The Collective (London/NYC, recently restructured), Habyt (Berlin-based, 40+ cities), Vonder (London/Berlin/Warsaw, premium focus)
Question 1Structuring
"UrbanNest's CEO has asked you to build a framework for evaluating which European cities to enter. How would you structure this analysis?"
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
Exhibit BUnit Economics by Format (UrbanNest London Actuals, Per Bed)
| Metric | Premium | Mid-Market | Student |
|---|---|---|---|
| Monthly Rent (GBP) | 1,100 | 680 | 420 |
| Average Occupancy | 87% | 94% | 97% |
| Monthly OpEx per Bed (GBP) | 520 | 320 | 180 |
| Conversion Cost per Bed (GBP 000s) | 45 | 25 | 14 |
| New Build Cost per Bed (GBP 000s) | 75 | 48 | 28 |
| Average Tenant Stay (months) | 8 | 14 | 10 |
| Customer Acquisition Cost (GBP) | 350 | 180 | 90 |
Source: UrbanNest case file
Exhibit CUrbanNest London Tenant Survey (n = 1,840)
| Segment | Share of Tenants | Avg Monthly Spend (GBP) | Top 3 Requirements | Likelihood to Relocate to a European City |
|---|---|---|---|---|
| Young Professionals (25-30) | 48% | 820 | Co-working, social events, gym | 35% |
| Postgraduate Students (21-25) | 22% | 480 | Study rooms, fast wifi, laundry | 15% |
| Digital Nomads (28-38) | 16% | 950 | Flexible lease, co-working, community | 62% |
| Corporate Relocations (30-45) | 9% | 1,200 | Private bathroom, quiet floor, parking | 28% |
| Other | 5% | 610 | Varies | 20% |
Source: UrbanNest case file
Try it first, then checkShow model answerHide model answer
The framework should address three sequential decisions:
1. City Selection (WHERE)
- Demand: young professional population size, rent-to-income ratio (housing pressure), inbound migration trends
- Supply: existing co-living beds, supply growth rate, gap between demand and current capacity
- Environment: regulatory friendliness (rent controls, zoning, permit timelines), tax treatment, currency risk
2. Format Selection (WHAT)
- Segment fit: which customer segments are largest in each city (see Exhibit C)
- Unit economics: rent levels, operating costs, and margin by format (see Exhibit B)
- Competitive positioning: where UrbanNest's brand and capabilities create differentiation
3. Entry Mode (HOW)
- Capital efficiency: build vs. convert vs. manage, alignment with GBP 150M budget
- Speed: which mode meets the 18-month deadline for first operations
- Control: ability to maintain brand standards and target occupancy rates
Key insight: Regulation is not a sliding scale -- it is a binary gate. Cities where rent controls apply to co-living should be deprioritized regardless of how attractive other metrics appear.
Bonus (case leadership): The candidate proactively sequences the work -- "Let me start with city selection as a filter, then match format to each surviving city, then determine entry mode based on budget and timeline constraints." This demonstrates structured thinking under ambiguity rather than trying to solve all three decisions simultaneously.
What the interviewer is looking forShow guidanceHide guidance
Give the candidate 2-3 minutes to organize their thoughts. A strong answer should go beyond a generic market entry framework and reflect the specific economics and risks of co-living real estate.
Good (covers basics): Candidate identifies market attractiveness (demand, supply, pricing) and feasibility (regulation, cost, competition) as two pillars. Mentions the need to compare cities on some criteria. Framework is logical but generic -- could apply to any market entry.
Strong (adds depth): Candidate structures around three interconnected decisions: (1) WHERE -- city selection based on demand drivers, supply dynamics, and regulatory environment; (2) WHAT -- format selection based on target segment fit and unit economics; (3) HOW -- entry mode based on capital efficiency, speed, and risk. Explicitly flags regulation as a potential dealbreaker, not just a factor to score.
Excellent (shows case leadership): Candidate recognizes that the three decisions are sequenced, not parallel: city selection narrows format options (student format only makes sense in strong university cities), and format choice constrains entry mode (premium requires more operational control than management contracts allow). Proposes evaluating cities through a "must-have vs. nice-to-have" filter where regulatory compatibility is a gate, not a score. Mentions the 18-month operational deadline as a binding constraint that eliminates new-build-only cities from the first wave.
Question 2Numeracy
"UrbanNest is comparing two 200-bed mid-market conversion properties. Using the data below, calculate the annual operating profit and simple payback period for each city. Which investment is more attractive, and why?"
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
Additional InformationAsk for more dataHide data
| Metric | Amsterdam | Madrid |
|---|---|---|
| Property size | 200 beds | 200 beds |
| Effective monthly revenue per bed | EUR 900 | EUR 600 |
| Monthly operating cost per bed | EUR 400 | EUR 200 |
| Conversion cost per bed | EUR 30,000 | EUR 12,000 |
Effective revenue is net of expected vacancy (derived from Exhibit A market rents at ~60% co-living discount, adjusted for target occupancy).
Exhibit AEuropean City Comparison
| City | Avg 1-Bed Rent (EUR/mo) | Young Professionals 25-34 (000s) | Co-Living Beds (Current) | YoY Supply Growth | Rent-to-Income Ratio | Regulatory Score (1-5) |
|---|---|---|---|---|---|---|
| Berlin | 1,200 | 520 | 1,800 | 22% | 42% | 1 |
| Amsterdam | 1,500 | 175 | 2,100 | 9% | 38% | 4 |
| Lisbon | 850 | 135 | 600 | 34% | 41% | 3 |
| Madrid | 1,000 | 460 | 900 | 16% | 30% | 4 |
| Dublin | 1,650 | 120 | 850 | 11% | 44% | 3 |
| Milan | 1,100 | 280 | 750 | 14% | 33% | 3 |
| Copenhagen | 1,400 | 105 | 450 | 5% | 27% | 5 |
| Warsaw | 650 | 340 | 350 | 30% | 19% | 4 |
Regulatory Score: 1 = strict rent controls apply to co-living; 5 = co-living classified as commercial hospitality with full pricing freedom. Score reflects current legislation and pending proposals.
Source: UrbanNest case file
Try it first, then checkShow model answerHide model answer
Amsterdam:
| Step | Calculation | Result |
|---|---|---|
| Annual revenue per bed | EUR 900 x 12 | EUR 10,800 |
| Annual OpEx per bed | EUR 400 x 12 | EUR 4,800 |
| Annual profit per bed | EUR 10,800 - EUR 4,800 | EUR 6,000 |
| Total annual profit (200 beds) | 200 x EUR 6,000 | EUR 1,200,000 |
| Total investment | 200 x EUR 30,000 | EUR 6,000,000 |
| Payback period | EUR 6.0M / EUR 1.2M | 5.0 years |
Madrid:
| Step | Calculation | Result |
|---|---|---|
| Annual revenue per bed | EUR 600 x 12 | EUR 7,200 |
| Annual OpEx per bed | EUR 200 x 12 | EUR 2,400 |
| Annual profit per bed | EUR 7,200 - EUR 2,400 | EUR 4,800 |
| Total annual profit (200 beds) | 200 x EUR 4,800 | EUR 960,000 |
| Total investment | 200 x EUR 12,000 | EUR 2,400,000 |
| Payback period | EUR 2.4M / EUR 960K | 2.5 years |
Summary Comparison:
| Metric | Amsterdam | Madrid |
|---|---|---|
| Annual operating profit | EUR 1,200,000 | EUR 960,000 |
| Payback period | 5.0 years | 2.5 years |
| Annual return on capital | 20% | 40% |
| Capital required per property | EUR 6,000,000 | EUR 2,400,000 |
So-What Cascade:
- Level 1 (surface): Amsterdam generates 25% more annual profit per property (EUR 1.2M vs. EUR 960K)
- Level 2 (implication): Madrid delivers double the return on capital (40% vs. 20%) and recovers investment in half the time, reducing downside risk
- Level 3 (actionable): With GBP 150M (~EUR 175M), UrbanNest could fund ~29 Amsterdam conversions OR ~73 Madrid conversions. A portfolio weighted toward Madrid maximizes capital efficiency and enables faster reinvestment. However, Amsterdam's higher absolute profit and premium market positioning may justify 2-3 flagship properties for brand establishment.
What the interviewer is looking forShow guidanceHide guidance
The candidate should complete this in approximately 2 minutes. The arithmetic is intentionally clean. Watch for whether they move beyond payback period to discuss return on capital and portfolio-level implications given the GBP 150M budget.
Question 3Judgement & Insights
"Looking at Exhibit A, the CEO's initial shortlist includes Berlin, Amsterdam, and Lisbon. Do you agree with this selection? What changes would you recommend, and why?"
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
Push the candidate to reference specific data from the exhibits.
Try it first, then checkShow model answerHide model answer
Berlin (REMOVE from shortlist): Berlin's regulatory score of 1 is disqualifying. Germany's Mietpreisbremse caps new rental contracts to within 10% of the local reference rent, and Berlin has historically pursued even stricter measures. The 42% rent-to-income ratio -- the metric making Berlin appear most attractive -- is actually a symptom of the same political pressure that produces rent controls. High housing stress leads to regulatory intervention. Co-living operators in Berlin cannot price at the premium needed to justify conversion investment. The 520K young professional population is irrelevant if UrbanNest cannot monetize it.
Lisbon (DOWNGRADE to management contract only): Current supply of 600 beds looks attractive, but 34% annual supply growth means roughly 200 new beds per year. Within 3 years, supply could approach 1,400 beds against only 135K young professionals. The market may saturate before UrbanNest reaches stabilized occupancy. If entering at all, use a management contract to limit capital exposure.
Amsterdam (KEEP): Favorable regulation (score 4), high rents (EUR 1,500), and mature market with moderate supply growth (9%). Smaller population (175K) is mitigated by affluence and international talent inflows. Ideal for a premium flagship to anchor UrbanNest's European brand.
Madrid (ADD): Second-largest young professional population (460K), favorable regulation (score 4), proven unit economics with 2.5-year payback (from Question 2). Madrid should be the volume play -- multiple mid-market conversions to build scale and operational capability across Europe.
Revised shortlist: Amsterdam (1-2 premium flagships), Madrid (3-5 mid-market conversions), Lisbon (management contract only if a local partner is identified).
Additional depth for strong candidates: Cross-reference Exhibit C. Digital nomads (16% of tenants, 62% willingness to relocate) are the most mobile segment but have short average stays (implied by flexible lease preference). Young professionals (48%, 35% relocate-willing) are the core revenue engine. Madrid's 460K young professional pool supports a mid-market volume strategy, while Amsterdam's affluent base aligns with premium positioning and corporate relocations (9% of tenants, 28% relocate-willing, highest spend at GBP 1,200/month).
What the interviewer is looking forShow guidanceHide guidance
The CEO's shortlist is deliberately flawed. Berlin is a regulatory trap. Candidates must identify this without prompting.
Good: Candidate agrees Berlin has strong demand metrics but raises "some concerns" about the low regulatory score without specifying the mechanism. May suggest adding Madrid as a fourth city.
Strong: Candidate specifically identifies that Berlin's regulatory score of 1 reflects rent control legislation (Mietpreisbremse) that would cap UrbanNest's pricing power. Notes that a high rent-to-income ratio actually confirms housing is a political issue in Berlin, making future regulation more likely, not less. Recommends replacing Berlin with Madrid based on its large population, favorable regulation, and strong unit economics from Question 2.
Excellent: Candidate reframes the entire shortlist logic. Identifies three traps in Exhibit A: (1) Berlin's regulation makes its demand metrics irrelevant to UrbanNest's model; (2) Lisbon's 34% annual supply growth signals near-term oversaturation despite low current stock -- at this growth rate, supply triples within 3 years against only 135K young professionals; (3) Dublin's high rents mask a small addressable population of 120K that limits scale. Proposes a revised shortlist of Amsterdam (flagship brand entry), Madrid (scale and capital efficiency), and a third city selected based on Exhibit C segment data -- potentially Warsaw (emerging, low-cost, large population) or Milan (design/fashion positioning for premium format). References the 18-month deadline to argue for conversion-ready cities.
Question 4Synthesis
"The CEO has 10 minutes before the board meeting. What is your recommendation?"
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
Try it first, then checkShow model answerHide model answer
Recommendation: UrbanNest should enter Amsterdam and Madrid in a two-phase approach, with an optional management contract in Lisbon.
Phase 1 (Months 1-18): Prove the model -- EUR 15M deployed
- Madrid: Convert 2 properties (400 beds total, EUR 4.8M investment). Mid-market format. Targets the 460K young professional base with 2.5-year payback and 40% return on capital.
- Amsterdam: Convert 1 flagship property (200 beds, EUR 6.0M investment). Premium format. Establishes European brand credibility. 5.0-year payback but highest absolute profit.
- Lisbon: Sign 1 management contract (0 capital, 3-month launch). Tests Southern European demand with no downside.
Phase 2 (Months 18-36): Scale what works -- remaining EUR ~155M available
- Double down on the city showing strongest occupancy ramp and tenant acquisition cost
- Target 8-12 additional conversions based on Phase 1 learnings
- Reassess Warsaw and Milan as potential third markets
Key risks and mitigations:
- Currency: EUR revenues servicing GBP debt -- hedge first 3 years of projected cash flows
- Execution: No local team -- hire a European Managing Director before first conversion begins
- Regulatory: Monitor Berlin and Lisbon for regulatory shifts; do not enter Berlin until rent control regime changes
Budget math: Phase 1 uses ~EUR 11M (~GBP 10M), preserving 93% of capital for Phase 2 scale-up. This aligns with the investors' 15% IRR target by deploying capital only after operational proof points.
Why not Berlin: Despite having the largest young professional population in our data set, Berlin's rent control regime (regulatory score 1 of 5) would cap co-living rents below the threshold needed to justify conversion costs. The same housing pressure that makes Berlin appear attractive is exactly what drives the political will for rent regulation. We recommend monitoring Berlin for regulatory changes but not deploying capital until the environment shifts.
Next steps:
- Hire a European Managing Director with multi-market real estate experience (Month 1)
- Engage local brokers in Amsterdam and Madrid to identify conversion-ready buildings (Months 1-3)
- Establish EUR/GBP hedging program covering 36 months of projected cash flows (Month 2)
- Sign heads of terms on first Madrid conversion and Amsterdam flagship by Month 6
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
The candidate should deliver a structured, 90-second recommendation that ties together city selection, format, entry mode, phasing, and budget allocation. Penalize generic summaries that restate findings without a clear action plan. Reward candidates who quantify the recommendation, address key risks, and propose a decision timeline.
Good: Candidate recommends Amsterdam and Madrid with some rationale but does not quantify budget allocation or address phasing.
Strong: Candidate presents a phased plan with specific capital allocation, format choices per city, and 2-3 key risks with mitigations. References earlier analysis (payback periods, regulatory scores) to support the recommendation.
Excellent: Candidate frames the recommendation around the investor mandate (15% IRR, 18-month deadline), uses Phase 1 as a "proof of concept" before committing the bulk of capital, and identifies the management contract as a low-risk option to test uncertain markets. Anticipates board questions about Berlin exclusion and has a concise rebuttal ready.