
WeWork documents reveal it owes $18B in rent - tosh
https://www.businessinsider.de/wework-500-million-bond-sale-financials-analysis-2018-4
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alberth
What’s wrong with having $18B in rent? Seriously.

WeWork is in the same business as what Hertz is in for cars.

They rent out an expensive asset (eg commercial real estate and automobiles)

Hertz has $21B in liabilities [1], which is largely comparized of paying
financing charges for all of those Toyota Camrys they rent out.

Yet they are still profitable.

[1] [http://financials.morningstar.com/balance-
sheet/bs.html?t=HT...](http://financials.morningstar.com/balance-
sheet/bs.html?t=HTZ&region=usa)

~~~
et-al
The concern is that real estate fluctuates more than automobile prices.

If the market tanks and rents go down, then WeWork is locked into overpriced
rates. They have contracts until 2022.

Yesterday's discussion [0] did point out that WeWork leases from an LLC
subsidiary that leases from the actual building owners. This would shelter
WeWork Corp in an odd corporate structuring sort of way (similar to McDonald's
making money off real estate).

[0]
[https://news.ycombinator.com/item?id=16913110](https://news.ycombinator.com/item?id=16913110)

~~~
i386
There's some bargaining power on the lessee going on here too. The way I've
heard it works is that they would lock in for a number of years at a reduced
market rate. The longer a tenant is contracted in, the risk of the building
being empty lowers for the owner. This allows a lower price per month to be
negotiated because on average the building isn't going to be non-revenue
positive.

Now, if property prices take a dive, I'm not sure that would impact WeWork's
business all too much as their main clientele are solo entrepreneurs or small
startups that couldn't otherwise afford an office fit out and/or the risk of
taking on a lease. There is more value in WeWork than just the building.

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joshmn
The article mentioned is
[https://www.bloomberg.com/news/articles/2018-04-24/the-18-bi...](https://www.bloomberg.com/news/articles/2018-04-24/the-18-billion-
rent-bill-the-numbers-behind-wework-s-empire)

At the very bottom,

> Since 2015, WeWork has also leased space in some buildings in which CEO
> “Adam Neumann and certain of his immediate family members hold ownership
> interests,”

Kind of weird, but maybe I'm missing something.

~~~
CyberDildonics
Sounds like a good way to get investor money into your own pocket even if a
company isn't profitable.

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Regardsyjc
Do they really have $18B in liabilities when they only generated $822M in
revenue with $1.8B in expenses? Could someone explain the math of how this
business makes or will make money?

~~~
tfehring
They don't have $18bn in liabilities. Total liabilities as of 12/31/17 are
$2.4bn, including $1.7bn in unpaid rent [0]. They've committed to paying $18bn
in rent on space they're currently leasing [1]. But that's not carried as a
liability on their balance sheet, and barring a collapse in demand (which _is_
a possibility that potential creditors should consider), they'll receive rent
payments from clients to fund those payments as they come due.

As an aside, this sort of confusion is why it's important to link to either a
primary source or a good secondary source whenever possible, in my opinion.
The Bloomberg article is clear on this issue, while the Business Insider
article linked is just a watered-down, ambiguous summary of that article.

[0] [https://ftalphaville.ft.com/2018/04/24/1524606395000/More-
on...](https://ftalphaville.ft.com/2018/04/24/1524606395000/More-on-WeWork-
and-its-bond-offering/)

[1]
[https://www.bloomberg.com/news/articles/2018-04-24/the-18-bi...](https://www.bloomberg.com/news/articles/2018-04-24/the-18-billion-
rent-bill-the-numbers-behind-wework-s-empire)

------
collyw
Can someone give ma a rough estimate of what $18B buys you?

Is that a 100 storey skyscraper in New York? 18 of them? (I am guessing that
an apartment there must cost > $1 million looking at the prices here in
Barcelona).

~~~
toddkazakov
10 Burj Khalifa's

~~~
nontechdude1
1000 whiz khalifas

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james-skemp
Possible duplicate of
[https://news.ycombinator.com/item?id=16913110](https://news.ycombinator.com/item?id=16913110)
?

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nontechdude1
i don't understand a business concept that provides essentially a combination
between what you get at a public library and what you get at a workplace for a
fee.

they are a "salon" for techno-imperialists who think they are too good to
stare at a computer at a library or starbucks

if they make money though, i guess they prove me wrong.

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hkon
They will never be profitable this way then.

