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Magical indeed. From the chart in the article it looks like for the most recent half-year they were paid $1.35B in rent and spent $1.23B to operate their properties, which works out to just $120MM in operating income for the year, let's say $250MM for the year. Per the S1 they already have around $4B of debt which looks like it costs them about $80MM per year in interest. That leaves about $170MM in plausible "earnings" if you assume they didn't have any other costs (they do, massive ones, but for sake of argument). The suggested IPO valuations are about 400x that amount, or about 20x higher than the average P/E of the S&P 500.

Digging into those other costs is informative as well, the numbers for 2018:

    Pre-opening location expenses $350MM
    Growth and new market development expenses $475MM
    Sales and marketing expenses  $370MM
One could make some sort of argument that the first two categories are long-term investments, but the last one really stands out to me: they spent $37 on sales and marketing for every $25 they "earned".

Their sales and marketing was $370m/$1350m or 27% of revenue. Is that in line with industry norms?

I think it makes little sense to express Sales & Marketing expense as a percentage of Net Income...

You could express it in terms of New Revenue Growth, to get a feel for customer acquisition cost, and then look at churn to get a feel for lifetime value and payback periods... if you wanted to analyze them like a "SaaS" type business.

What industry are we talking about? Most commercial real estate used for offices spends almost nothing on marketing (they put a sign in the window perhaps).

I don't think SaaS is at all relevant. Typical SaaS gross margins are upwards of 60%. WeWork's gross margins are under 10%.

Edit: found a source[1] that states "5% of broker’s cut is standard" for commercial real estate marketing expenses, with a broker getting about half of the commission which is around 2.5%. Even if you went with 10% of a 10% commission rate that would only be 1% of the total.

[1] https://www.calicomarketing.com/commercial-real-estate-budge...

Maybe that 'sales and marketing' figure includes discounts on rent to gain new tenants?

But I am sure they have great parties.

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