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WeWork documents reveal it owes $18B in rent (businessinsider.de)
39 points by tosh 9 months ago | hide | past | web | favorite | 16 comments

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...

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

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.

The article mentioned is https://www.bloomberg.com/news/articles/2018-04-24/the-18-bi...

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.

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

Possible self dealing.

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?

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...

[1] https://www.bloomberg.com/news/articles/2018-04-24/the-18-bi...

Presumably those $18B are calculated over the entire lifetime of their leases, not an actual $18B in back rent.

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).

Looking through the price history and proposals for this well-known skyscraper[1] it looks like it varies. You can get one for ~$1B but there are also $12B proposals for new skyscrapers at that site. WeWorks are usually at premium locations, so that probably drives their rents up a lot.

[1] https://en.wikipedia.org/wiki/666_Fifth_Avenue#Ownership_and...

10 Burj Khalifa's

1000 whiz khalifas

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.

They will never be profitable this way then.

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