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The Property Industry Is Falling Out of Love with WeWork

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Re: The Property Industry Is Falling Out of Love with WeWork

#41

Post by donedeals »

dylan604 wrote: post #22
munk-a wrote: post #16

Earlier quoted context omitted.

Assuming the sub-leasor wasn't trying being dishonest, they should remain the primary responsible party to the leasor. I work for a company and have never met the person owning the building, but if I wrecked the hallway the owner would quite correctly go and talk with my employer. The only way I see this becoming an issue is if WeWork was being shifty about taking responsibility for damage and risk caused by their cl…

Maybe, but they are just "weird" about things outside of their comfort zone. I worked for a company in a CBRE building that had lawyers, financial planners, etc types of tenants. The company I worked for was a film/video post-production company. The obstacles the building put in place to the company to move in gave every clear indication that they really did not want that company as a tenant. For example, in the rais…

Most of the items you cite are code requirements. Operators like CBRE maintain buildings to class A standards that don’t allow for any violations.

The $1M is escrow is standard and par for the course and a guarantee against credit risk. Many landlords actually require a letter of credit from banks so that if your company were to go bankrupt the money wouldn’t be subject to seizure by bankruptcy courts.

Source: Work at similar landlord.

edit: spelling

Re: The Property Industry Is Falling Out of Love with WeWork

#42

Post by danieltillett »

Animats wrote: post #37

Uh oh, another overpriced company funded by Softbank. Softbank, remember, is funded by Saudi Arabia's sovereign wealth fund. They're also behind Uber. They seem to be the world's largest source of dumb money. I wonder what the big customer lease deals with WeWork look like. They probably don't get the markup they do with little tenants.

Will be interesting to see what happens if the oil price stays down. Even dumb money can't spend what it doesn't have.

Re: The Property Industry Is Falling Out of Love with WeWork

#43

Post by a13n »

code4tee wrote: post #40

At the end of the day WeWork is essentially a middle man. If the model catches on landlords can make WeWork irrelevant by just adapting and offering “WeWork” style coworking space thus it’s not clear what the end game of all this is. If it fails it fails. If it succeeds it’s super easy to copy and cut them out of the equation. WeWork as a company is also becoming increasingly unfocused. They’re getting into everythin…

I don't agree that landlords can easily replicate WeWork. First of all WeWork has an incredible brand, and great processes/assets that let them run co-working spaces more profitably.

Amazon seems like a counter point to your focus point too.

Re: The Property Industry Is Falling Out of Love with WeWork

#44

Post by jacquesm »

danieltillett wrote: post #42
Animats wrote: post #37

Uh oh, another overpriced company funded by Softbank. Softbank, remember, is funded by Saudi Arabia's sovereign wealth fund. They're also behind Uber. They seem to be the world's largest source of dumb money. I wonder what the big customer lease deals with WeWork look like. They probably don't get the markup they do with little tenants.

Will be interesting to see what happens if the oil price stays down. Even dumb money can't spend what it doesn't have.

It will take a long long time to spend that money, even in a dumb way.

Re: The Property Industry Is Falling Out of Love with WeWork

#45

Post by 0x8BADF00D »

Animats wrote: post #37

Uh oh, another overpriced company funded by Softbank. Softbank, remember, is funded by Saudi Arabia's sovereign wealth fund. They're also behind Uber. They seem to be the world's largest source of dumb money. I wonder what the big customer lease deals with WeWork look like. They probably don't get the markup they do with little tenants.

As the recession deepens, WeWork will surely eventually implode. I can see it now: vast swathes of empty commercial real estate. If you thought ghost malls were bad, wait until you see ghost WeWorks.

Re: The Property Industry Is Falling Out of Love with WeWork

#46

Post by jacquesm »

I absolutely hate WeWork. Due to the nature of our work we have to meet with people there in various locations, the security on-site is laughable but at the same time they make you jump through all kinds of hoops such as photographing you face-first on entry, easily defeated by blocking the camera.

The facilities are noisy, distracting, totally unusable to discuss anything that is even remotely confidential and there is a reasonably high amount of theft by walk-ins that make off with people's laptops or phones.

The sooner they bugger off the better.

Re: The Property Industry Is Falling Out of Love with WeWork

#47

Post by dsr_ »

donedeals wrote: post #39
pimlottc wrote: post #35

> WeWork forms a subsidiary to represent each lease deal, which means individual locations could fold without leaving the company itself with much risk. The parent company only guarantees the lease for about six to 12 months on a 15-year agreement, according to documents associated with WeWork’s inaugural bond offering. So, they sign a 15-year lease but are only on the hook for the first year? How does that work? Sou…

Wework Brooklyn #22 LLC signs the lease with the landlord and thus is responsible for the lease obligations. Wework LLC (proper) guarantees these lease payments for only 6- 12 months of the lease. After this time the only party responsible for the lease is the LLC that was formed. Landlords are likely agreeing to this only because Wework would never be able to sign a lease with any owner if they defaulted on a locati…

Which sets them up for WeWork subsidiaries to default on any building that's more than X months old and unprofitable. That's a terrible deal for the landlord, if the landlord priced it as a 15 year deal instead of a one year. Absolutely great for WeWork. Terrible for anyone who wants offices, since WeWork will sit on a large chunk of the market.

Re: The Property Industry Is Falling Out of Love with WeWork

#48

Post by [deleted] »

a13n wrote: post #43
code4tee wrote: post #40

At the end of the day WeWork is essentially a middle man. If the model catches on landlords can make WeWork irrelevant by just adapting and offering “WeWork” style coworking space thus it’s not clear what the end game of all this is. If it fails it fails. If it succeeds it’s super easy to copy and cut them out of the equation. WeWork as a company is also becoming increasingly unfocused. They’re getting into everythin…

I don't agree that landlords can easily replicate WeWork. First of all WeWork has an incredible brand, and great processes/assets that let them run co-working spaces more profitably. Amazon seems like a counter point to your focus point too.

[deleted]

Re: The Property Industry Is Falling Out of Love with WeWork

#49

Post by dsr_ »

grigjd3 wrote: post #33
hbosch wrote: post #31

Earlier quoted context omitted.

What’s WeWork’s “product” again? Exposed brick and free beer? Seems like the only roadblock to successful emulation here is money and property — both of which CBRE has. You can hire someone for the interior design. They already split off a new brand with a fun, easy name.

WeWork's product is handling landlord and broker negotiations for you. They are giving more power to the tenant as WeWork is large enough that they often carry significantly more leverage into a negotiation.

Office building landlord negotiations are rarely problematic. The issues come from (a) new landlords who don't know what they're doing; (b) new tenants who don't know what they're doing; (c) trying to actually find space that works.

WeWork doesn't give more power to the tenant. WeWork is going to be less flexible on terms for the tenants, because they're doing smaller, shorter-term deals. No space improvement, no reconfiguration, no nothing -- you want the space or not?

Re: The Property Industry Is Falling Out of Love with WeWork

#50

Post by jfoutz »

crazygringo wrote: post #36
pimlottc wrote: post #35

> WeWork forms a subsidiary to represent each lease deal, which means individual locations could fold without leaving the company itself with much risk. The parent company only guarantees the lease for about six to 12 months on a 15-year agreement, according to documents associated with WeWork’s inaugural bond offering. So, they sign a 15-year lease but are only on the hook for the first year? How does that work? Sou…

The subsidiary signs the 15-year lease, not WeWork. So basically if the location turns out to be unprofitable, the subsidiary goes out of business or goes bankrupt and WeWork isn't stuck with the lease. From the landlord's perspective, yes it is basically equivalent to a year lease with option to extend... not totally clear why the landlord would agree to that.

Because money. This is restaurant expansion 101.

In this specific case a large sophisticated organization may be exploiting an unsophisticated organization, but really this is standard operating procedure for any franchise.

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