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Critics say WeWork is an overvalued real-estate play

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Re: Critics say WeWork is an overvalued real-estate play

#101

Post by dsr_ »

rgbrenner wrote: post #21
eddieplan9 wrote: post #10

Earlier quoted context omitted.

Comparing WeWork to traditional office landlord is like comparing Starbucks to Dunkin' Donut. Please don't go to Starbucks because its coffee is better or cheaper (it's neither), but as a lifestyle choice. Similarly, people don't go to WeWork because they need a desk.

And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN. At the end of the day, WeWork uses X sqft per desk, has an average occupancy rate, etc. So one way to look at their business is revenue/sqft.. which is very similar to a traditional landlord. The only real difference is that WeWork can improve their revenue/sqft by a…

If Boston Properties wanted to add WeWork style services to their current buildings, they could do that. And if it didn't turn out to be profitable, they could stop doing it and still own all their buildings.

Or they could contract with some well-known service corporation to provide those services in their buildings. Sodexho?

If WeWork wanted to own all their buildings, they would need to convince a lot of landlords to take stock instead of cash. Though I don't know that they could afford to do that.

Re: Critics say WeWork is an overvalued real-estate play

#102

Post by mcny »

madaxe_again wrote: post #33
csomar wrote: post #22

Earlier quoted context omitted.

People want to feel trendy. They are not running "Startups" because they want to build stuff that scales. They are running mostly failed businesses that look trendy/cool, so that they can "fit in". Selling emotions is a big business. Lots of brands are relying on it.

Yep - hell, most businesses sell on emotion - it's a much more secure attachment than ration, and even when it comes to b2b, more often than not the decision comes down to who they like more/who gives a better vibe. That said when things go south, they really go south, as an emotional buy allows for betrayal and an emotional fall-out. Which is why I think wework is grossly overvalued and likely to follow a parabolic…

> Which is why I think wework is grossly overvalued and likely to follow a parabolic trajectory.

I still think the same way about dropbox but thankfully for YCombinator as well as Drew, Arash et al reality does not follow my train of thought. (I am ashamed of the way I reacted to the original news about Dropbox and I bring it up not to shame dropbox but to caution myself from saying something like that again. The world is... weird. I mean the top story at the moment is mongo db valuation https://news.ycombinator.com/item?id=15508507 https://archive.fo/hxHW4 )

Edit: name

Re: Critics say WeWork is an overvalued real-estate play

#103

Post by tbarbugli »

baxtr wrote: post #91

I worked in a wework Office for about a year. At first I thought the environment was great, I loved the free beer and the community. However, once we moved out, I realized how much more productive we were in our own office. We had - more space - less noise, in terms of sound and visually (you see everybody passing by through the glass and have to force yourself not to look at them. For a while we had some posters up,…

Same exact experience for me (in NL). I have to say that compared to all other co-working spaces I used (6 so far), WeWork is the only one that really nailed it in terms of operations. (WiFi/Internet, delivery, key-cards, ...)

Re: Critics say WeWork is an overvalued real-estate play

#104

Post by KGIII »

madaxe_again wrote: post #18
eddieplan9 wrote: post #10

Earlier quoted context omitted.

Comparing WeWork to traditional office landlord is like comparing Starbucks to Dunkin' Donut. Please don't go to Starbucks because its coffee is better or cheaper (it's neither), but as a lifestyle choice. Similarly, people don't go to WeWork because they need a desk.

Indeed, they go there for the foosball, table tennis, coffee and self-congratulation. Sure, sure, physical proximity to other startups, mentorship, etc. - but frankly the impression I've got from each wework location I've been to has been of people wanting the "startup lifestyle" rather than wanting to build a business. The actual startup lifestyle is sweating in a cheap grotty office, rice, and sleeping under your d…

Raggedy couch and a suit on the back of your office door.

You didn't mean to stay there until 02:00, but you're going to have to be back at 06:00 so you might as well stay there.

Re: Critics say WeWork is an overvalued real-estate play

#105

Post by Buttes »

tptacek wrote: post #79
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

In a lot of markets, WeWork is a great deal. We just moved from Chicago West Loop WeWork to our first real office; we got what I think is a pretty amazing deal on our new office and it is still very difficult to beat the package WeWork puts together. But that's not the critique being leveled at WeWork here; the critique is, WeWork can't in the long run be profitable at these rates. In a lot of their spaces --- maybe…

>they were custom-designed!).

I used to work at a VC funded company that had a $10,000 custom couch (which sucked, totally uncomfortable, the custom dollars went into the shape/making it fit) and prolly 10x that spent on custom lighting fixtures (also terrible, ridiculously dim for a work space, but looked nice). In a super high rent urban area. I assume they make up the difference with glass walls and giant open spaces. This is (unfortunately) how offices are built these days.

Re: Critics say WeWork is an overvalued real-estate play

#106

Post by jartelt »

neaden wrote: post #9

"Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion." This seems to me to be a pretty big warning sign that the company is overvalued.

Hyatt and Hilton own a lot more real estate than Airbnb. Perhaps a lot of the value is not in the actual building itself?

Re: Critics say WeWork is an overvalued real-estate play

#107

Post by yourapostasy »

mbesto wrote: post #30
rgbrenner wrote: post #21

Earlier quoted context omitted.

And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN. At the end of the day, WeWork uses X sqft per desk, has an average occupancy rate, etc. So one way to look at their business is revenue/sqft.. which is very similar to a traditional landlord. The only real difference is that WeWork can improve their revenue/sqft by a…

> and they can increase prices at a faster rate than a traditional landlord who has a longer lease term. They can also lose clients much quicker than a landlord that has longer lease terms. The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).

> The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).

The way they go about doing that looks like an ad-ish model. "Here's a bunch of vendors that were willing to pay our vigorish to be shoved in front of you." That's tough to build a premium around if you don't scale the ads, or have a compelling story for the advertisers on how much more effectively WeWork converts their co-working renters than, say, Google AdWords. An A-B test WeWork might carry out is put in an AdWords campaign side-by-side with a WeWork-based campaign for as many vendor types they can think of, and measure the results between the two on an ( ad-spend : sales_expenses - revenue ) ratio basis, and tweak their strategy model from there. If I'm one of the vendors WeWork is trying to pitch to their co-working renters, then I'd immediately be thinking, "they reach a smaller audience than my AdWords purchases (or whatever other marketing channel I'm comparing to), but supposedly more targeted, so if I put some spend there does it really perform?"

If you are a new startup, then there is a lot of bullshit in the business world that wastes a lot of your time because you simply don't know better on what to spend your limited time upon. Having a SCORES-like concierge/advisor service on tap (for a fee after an initial time of trying it out, perhaps) might be another way for WeWork to build premium value. But not scalable.

If the premium on-site staff is highly attuned into their renters' concerns, etc., that might be a way to add value by using that information as a development input. But that's very non-scalable.

Their core value proposition seems to run right into competing against Google on an efficiency basis, so I must be missing something the investors didn't.

Re: Critics say WeWork is an overvalued real-estate play

#108

Post by taternuts »

karmelapple wrote: post #98
geoffw8 wrote: post #72

Earlier quoted context omitted.

True - but my god the experiences aren't even in the same league and for me that matters. WeWork is worlds apart.

I guess it depends what you're looking for, everything from price point to frequency of use. I have a Businessworld Gold membership, and for its price (which is significantly lower than a similar WeWork membership), I can visit any "business lounge" location in the world. I don't use it every day, nor even every week, but when I'm on travel, I have relied on knowing they will have solid internet and a relatively-quie…

I work in a Regus office in CA, and they are constantly having issues. The washers/dryers are always broken, the AC has to be fixed every other week, yesterday they had a plumbing issue and the water was out so no one could get the 'free' coffee let alone use the bathrooms. There's almost always something not working, however most the times it's something relatively minor and overall it's been a decent experience. I imagine WeWork would probably have those things ironed out for a lot more $$. The other thing is you have to pay extra to turn on AC if you want to work at night or on the weekends, which thankfully I haven't had to do with my current company.

Re: Critics say WeWork is an overvalued real-estate play

#109

Post by gonehome »

srmatto wrote: post #54
gonehome wrote: post #52

A little off topic, but I think it'd be cool if you could pay someone (a hotel chain? Airbnb?) a monthly 'rent' to live in any of their locations. The locations are guaranteed to have highspeed internet and some easy standardized way to move between them. This would be really cool for remote work since you could live everywhere and nowhere without having the overhead of having to do all the planning yourself.

Airbnb does have monthly rates. But no guaranteed internet afaik.

To clarify - not just rent one place for a month, but pay the organization a monthly rate and then move to any of the places whenever you want.

Re: Critics say WeWork is an overvalued real-estate play

#110

Post by geofft »

tryingagainbro wrote: post #44
neaden wrote: post #9

"Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion." This seems to me to be a pretty big warning sign that the company is overvalued.

Boston Properties Inc as far as I can tell hasn't much to do with blockchain. WeWork, on the other hand, may have 5 times less properties but they track them via blockchain or something like that.

Why? Blockchains are about distributed consensus. What part of WeWork (a single entity)'s ownership of properties needs distributed consensus?
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