INSUBCONTINENT EXCLUSIVE:
WeWork's general and administrative costs rose almost threefold in 2017
WeWork Cos
is tapping the bond market for the first time and in doing so, has provided a rare glimpse into the startling numbers behind its breakneck
million square feet, approaching the size of the entire office and retail space in London's Canary Wharf district, according to bond
documents reviewed by Bloomberg
In all, the New York company has committed to pay at least $18 billion in rent for that space, the documents show
WeWork declined to comment.These are the highlights:- MembershipWeWork boasted 220,000 members as of March 1, up from 7,000 four years ago
Those members have access to 251,000 desks in 234 locations spanning almost two dozen countries
While the company is best known for luring tech startup freelancers, the bond documents reveal an increasingly diverse customer base.-
RevenueThe massive jump in locations and memberships has driven revenue growth in excess of 100 percent
But costs are rising faster, resulting in a total net loss of $934 million last year
The company's growing use of discounts to attract new members has also pushed down the revenue it generates from each of them by 6.2 percent
to $6,928, the documents show.- OwnershipWeWork's general and administrative costs rose almost threefold in 2017, mostly because it bought
back stock from employees in October, according to the document
Last summer, WeWork had raised $4.4 billion from SoftBank Group Corp., some of which had been used to buy shares from employees and early
investors.WeWork Chief Executive Officer Adam Neumann holds more than 75 percent of outstanding shares of Class B common stock, the document
They give him more than 65 percent of the voting power, the ability to dictate who sits on the board and control of key decisions such as
acquisitions.- OccupancyA drive to lure more blue-chip companies into short-term spaces has helped boost WeWork's occupancy levels
The company said it needs at least 60 percent occupancy to cover each location's costs
Last year, it managed to fill 81 percent of desks, up 5 percentage points from a year earlier
WeWork now boasts members from about 22 percent of the Fortune 500, including HSBC, General Motors and Microsoft, the documents show.-
Buying long and selling shortWeWork's rapid expansion has resulted in an eye-watering rent bill that it's now seeking to manage by
diversifying into owning or managing buildings instead of just renting them
The company has committed to pay at least $5 billion in rent by 2022, with a further $13.2 billion due from 2023 onwards
Investors can also take comfort from the fact that each of WeWork's locations is housed within a separate subsidiary and isn't directly
leased by the parent company
While landlords are given guarantees or credit letters from the parent, these usually last for just six to 12 months on an average 15-year
lease, according to the bond documents
That should give WeWork more flexibility to close locations if times get tough, mitigating the risk of signing long-term leases while
renting space to members on short term contracts.- Related partiesSince 2015, WeWork has also leased space in some buildings in which CEO
"Adam Neumann and certain of his immediate family members hold ownership interests," according to the document
During the past two years, the company paid a total of $9.8 million for operating leases in buildings partially owned by officers and
affiliates of the company
Future payments under the leases will be at least $90 million, as of the end of last year, it said
A further $3.5 million was paid during 2016 and 2017 for a capital lease in a building owned by a related party, with future obligations
