SoftBank Backs Away from Part of Planned WeWork Bailout • Hacker News Board

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#41

Post by wayoutthere » Wed, Mar 18, 2020, 12:38 AM UTC

godzillabrennus wrote: post #19

Animats wrote: post #5

"The development won’t affect the $5 billion lifeline SoftBank agreed to give WeWork directly—cash the startup badly needed then as it ran out of runway, and which it is likely to continue to need as the worsening coronavirus outbreak empties out its desks." Er, yes. WeWork is dead until there is a COVID-19 vaccine. Tightly packing random people is out for now.

Largest corporate tenant in New York City. We are just starting to see the first wave of this crash.

Even after we start to recover; how many companies are going to keep as much floor space as they had before? Remote work is here to stay.

This is going to turn into a global commercial real estate crash in 6 months, no doubt.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#42

Post by jeremyjh » Wed, Mar 18, 2020, 1:04 AM UTC

Lazare wrote: post #24

TheFiend7 wrote: post #16

Earlier quoted context omitted.

Forgive my ignorance, but why is WeWork a PoS? I don't have much awareness on the situation.

It's a long story, but: First, sometimes people build (or buy) office buildings, and then lease the space in them to companies. Office buildings (and the land they're built on) tend to be very expensive, so landlords tend to be levered (ie, they borrow money to build/buy them), and they like to sign long term leases to try and lock in revenue so they know they can cover their loan payments. Companies like flexibility…

Is there any evidence SoftBank actually believed them? Belief was not required for SoftBank's business model to work (take it IPO before everyone figures out which end is up). They almost got away with it too.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#43

Post by reitzensteinm » Wed, Mar 18, 2020, 1:06 AM UTC

aerosmile wrote: post #25

gamesetmath wrote: post #12

Good. Let that PoS burn.

It's one thing to be mad at the founder, directors and officers. It's another thing to take away a very useful tool from the startup toolkit that millions of people find very helpful when starting a company. Having experienced the process of renting and furnishing a 2-4 person office before and after the rise of WeWork, I, for one, hope that they will stick around.

WeWork's advantage over other similar coworking places in large part came from their ability to burn investor cash to provide you with a premium experience.

I don't want WeWork to die, it would be better for it to figure out how to run in a sustainable manner. But once that happens, you may well find it's no longer differentiated from its many competitors.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#44

Post by swiley » Wed, Mar 18, 2020, 1:18 AM UTC

sjtgraham wrote: post #37

jazzkingrt wrote: post #32

Great timing! Current conditions are WeWork's nightmare scenario. WeWork's raison-d'etre is short term leasing. Leaseholders will end those leases if everyone is working from home. Add to that that an economic recession was always going to be the real test of WeWork's ability to keep up with its huge long-term leases.

Arguably it's in the interest of the landlords to make this work. If WeWork goes under there will be a ton of void commercial space. It's a question of how many lease payments to forgive before it makes sense (and is actually viable) to repossess the buildings and replacement tenants.

There’s going to be a lot of empty space.

The land owners did it to themselves pushing for tighter building codes and zoning. No one built, rent went up, the economy got more fragile because people on the bottom had absolutely nowhere to go. Now they’re going to pay for it (except the ones that saw this coming, I know the building I live in just got sold a few days ago...)

I’ve been saying for years that the housing market is irrational and that most of the US should be building more. Not that my opinion means anything but I also wasn’t the only person saying this.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#45

Post by joedevon » Wed, Mar 18, 2020, 1:52 AM UTC

Lazare wrote: post #24

TheFiend7 wrote: post #16

Earlier quoted context omitted.

Forgive my ignorance, but why is WeWork a PoS? I don't have much awareness on the situation.

It's a long story, but: First, sometimes people build (or buy) office buildings, and then lease the space in them to companies. Office buildings (and the land they're built on) tend to be very expensive, so landlords tend to be levered (ie, they borrow money to build/buy them), and they like to sign long term leases to try and lock in revenue so they know they can cover their loan payments. Companies like flexibility…

Pretty good summary but I think you were a little off on the Softbank side of things.

SB pioneered the practice, based on the concept of Blitzscaling, of pushing entrepreneurs to take an insane amount of money. WW's CEO likely convinced SB that it was a great idea, and then SB likely just ran it through their playbook of throwing money in. If you read up on SB, you'll hear several examples where they did this.

Their thesis is that if you pick a winner in a huge market and give it an insane amount of money, no one else can compete.

There might even be validity to the concept for some startups. But most definitely NOT in the case of WW.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#46

Post by raverbashing » Wed, Mar 18, 2020, 2:06 AM UTC

sjtgraham wrote: post #37

jazzkingrt wrote: post #32

Great timing! Current conditions are WeWork's nightmare scenario. WeWork's raison-d'etre is short term leasing. Leaseholders will end those leases if everyone is working from home. Add to that that an economic recession was always going to be the real test of WeWork's ability to keep up with its huge long-term leases.

Arguably it's in the interest of the landlords to make this work. If WeWork goes under there will be a ton of void commercial space. It's a question of how many lease payments to forgive before it makes sense (and is actually viable) to repossess the buildings and replacement tenants.

If it's on "interest of the landlords" to make it work, then it will fail. And they will end up with the bill.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#47

Post by nmfisher » Wed, Mar 18, 2020, 2:19 AM UTC

aerosmile wrote: post #25

gamesetmath wrote: post #12

Good. Let that PoS burn.

It's one thing to be mad at the founder, directors and officers. It's another thing to take away a very useful tool from the startup toolkit that millions of people find very helpful when starting a company. Having experienced the process of renting and furnishing a 2-4 person office before and after the rise of WeWork, I, for one, hope that they will stick around.

As a former customer, WeWork really got me offside. So much so that I switched coworking spaces to an independent provider. They made me feel like cattle in an abbatoir, not a paying customer that is central to their business.

They demanded that everything be done their way. Long story short, WeWork acquired the coworking space we were using and then used incredibly obnoxious tactics to "require" us to sign new contracts and move to the WeWork model (that removed a lot of benefits, like the meeting room booking credit system). Things like sending e-mails saying "This contract will expire in 24 hours, you must sign this today".

Or even afterwards, preventing my part-time employees from sitting next to my full-time desk. I could understand if the space were at capacity, but I was literally sitting in a row with 12 empty desks.

Not to mention the constant noise interruptions from community managers laughing, the music from the lobby, the printer requiring a driver installation, and so many more.

Coworking spaces are commercially viable, but I'm only going to fork over money to businesses who actually treat customers well (and not like a box in a spreadsheet to please investors). The whole WeWork company can die in a fire. Good riddance.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#48

Post by kragen » Wed, Mar 18, 2020, 2:35 AM UTC

sjtgraham wrote: post #37

jazzkingrt wrote: post #32

Great timing! Current conditions are WeWork's nightmare scenario. WeWork's raison-d'etre is short term leasing. Leaseholders will end those leases if everyone is working from home. Add to that that an economic recession was always going to be the real test of WeWork's ability to keep up with its huge long-term leases.

Arguably it's in the interest of the landlords to make this work. If WeWork goes under there will be a ton of void commercial space. It's a question of how many lease payments to forgive before it makes sense (and is actually viable) to repossess the buildings and replacement tenants.

I guess if anybody's going to bail out the criminals at WeWork, then, it'll be the landlords.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#49

Post by fyfy18 » Wed, Mar 18, 2020, 5:15 AM UTC

sjtgraham wrote: post #37

jazzkingrt wrote: post #32

Great timing! Current conditions are WeWork's nightmare scenario. WeWork's raison-d'etre is short term leasing. Leaseholders will end those leases if everyone is working from home. Add to that that an economic recession was always going to be the real test of WeWork's ability to keep up with its huge long-term leases.

Arguably it's in the interest of the landlords to make this work. If WeWork goes under there will be a ton of void commercial space. It's a question of how many lease payments to forgive before it makes sense (and is actually viable) to repossess the buildings and replacement tenants.

I don't think there is going to be a big demand for large commercial premises for a while. Even after this virus goes away, we are still most likely going be in a recession. Many knowledge workers (and maybe more importantly their managers) will have realised they can actually work from home.

The alternative is the landlords try to rent these spaces as co-working spaces themselves, but demand for that is going to drop too - which is the issue in the first place.

Re: SoftBank Backs Away from Part of Planned WeWork Bailout

#50

Post by lalaland1125 » Wed, Mar 18, 2020, 5:22 AM UTC

cnst wrote: post #2

A non-paywall source: http://archive.is/uRXE6 . This doesn't seem to have any effects for anyone other than investors; so, this is probably not really relevant for HN as there's hardly anything in the story for us to discuss.

https://github.com/iamadamdev/bypass-paywalls-firefox is a better solution.