Pretty sure at this point that everyone saw this coming. WeWork brings nothing to the table, besides brand recognition, that a landlord could not create on their own with the right management platform. Their business model is reliant on landlord's willingness to lease them space, and when you can just hire Hana (CBRE) why would you lease to any coworking company? Not only that, but WeWork has literally zero credit. Smart owners are VERY concerned about overexposure to WeWork. Not only that, but CBRE is entrenched into the world of commercial real estate. I would not be surprised at all if CBRE bundles this service into their management agreements. I fully expect that CBRE is about to choke WeWork out of the market.
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CBRE market cap 14.6B WeWork valuation 20B
CBRE - net income $700M, revenue $14.21BN WeWork - net loss $933M, revenue $886M
Besides the fact that WeWork's valuation is completely insane, I don't believe that the success of a company is determined by it's implied valuation.
Will be interesting to see how this plays out. Softbank just committed another $3B yesterday, valuing WeWork at $45B.
https://www.wsj.com/articles/softbank-boosts-wework-valuation-to-45-bil…
I predict that’s SoftBank vision find will have horrible returns within a few years. Uber is trash (from a down-to-earth investors POV), WeWork is trash... they’re just throwing money around at insane valuations because they have the money to do so
Crazy to think WeWork has a larger market cap than CBRE, JLL, CushWake, Colliers, Newmark and Regus combined...
I'm generally skeptical of WeWork too, but that's a bit unfair. WeWork provides space, furniture, flexibility, connectivity, etc. explicitly so that the landlord and tenants don't have to deal with that. "The right management platform" is a bit like a perfect 10 girl who is down with watching sports and playing video games and likes all of the same things you do and comes from a billionaire father who becomes your best friend and plans to give you the keys to the business when he retires. I'm sure that's out there somewhere, but it's a bit of a unicorn. There's a reason why WeWork has been successful and why it is growing rapidly. It's a bit more than just renting a single office
Just curious on your thoughts. Do you think the company is overvalued to hell? I feel like that goes to say, especially because Softbank and all these PE guys are there to make a quick buck through potential IPO, so they have incentive to pump the price a little bit.
I am also a little skeptical on how WeWork can perform in a down market as it has no other real business model to fall back on. If the big brokerages start coming into WeWork and other coworking spaces market, they have a lot more services to offer and I just don't see WeWork being able to compete with that.
With all that said, the big PE guys have to see something special here that most of us others can't see if they keep throwing massive amounts of money at it.
I'm not the guy to ask about that. I just know that from a tenant perspective it makes a lot of sense and if I was a hip young entrepreneur, WeWork sounds a lot cooler to me than CBRE
I am of the opinion that WeWork is overvalued. So much so that we've had the opportunity to buy multiple buildings where they are the primary tenant and we bow out because we can't get our investment committee or investors comfortable with them as a tenant.
But that's just our opinion, not really any data points behind it other than we don't think the business model is viable long-term.
You're not wrong. They are straddling TWO bubbles: tech and commercial RE.
That one building in Miami that was fully leased to We Work has been making the rounds for atleast a year now and they are not able to get it financed. Not a good sign and shows that lenders have a poor opinion on We Work.
I interned for a top 15 REPE this Summer that had several buildings with WeWork exposure. They noticed that they start taking a big capital markets hit when the property has greater than 30% exposure to WeWork.
Rating agencies are no longer rating WeWork's debt, which should be a major red flag to owners. Not surprised they are taking a hit upon disposition.
If you lease all your space to WeWork…
It's Regus valued with a tech multiple rather than a real estate multiple. Pretty silly.
'the big private equity guys' lol... this is not rocket science; there is no edge to Wework supporting this valuation. If you dig deep into what they make available, there is not much substance. Anyone working in real estate, and especially anyone that knows the mechanics of office operations/sales should be able to identify the bs on their bs and supporting statements. No technology that creates any efficiency, no nothing. The big investors are probably recycling each other's capital at this point, and yes, the exit will be an IPO that is either a disaster, or fucks your parents' 401ks
WeWork has done well for itself, albeit only during the current up-cycle we are in. They haven't proven their staying power through a correction - look what happened to Regus - and they continue to lever-up. I am far more bullish on Hana. This concept was driven by CBRE's relationship with Institutional Owners asking them to deliver this service. The difference is that it is a Landlord initiative - not a tenant/sub-tenant scenario a la WeWork - whereby all of the benefits are aimed at the building tenants.
What's the difference between Hana and Industrious in terms of business model?
In a downturn, I'm assuming CBRE can undercut WeWork on price which could kill WeWork. But I think success could still come down to branding. People will pay $200 for a $15 shirt if it has a certain designer label on it...
No one is safe in a downturn CBRE stock was $2 in 2009 and worth less than a billion lol (a whole company worth less than Sky apartment in Manhattan, imagine that)
Crazy statistic. 2009 wasn't your average downturn though.
WeWork is absolute insanity. They own nothing, have GIGANTIC long-term obligations that are fixed, but their revenues are month-to-month - they can go to zero in 30 days. This is picking up dimes in front of a steamroller. The analytics are valuable and worth something, but the idea that WeWork is a viable business long-term is nuts. Honestly the biggest thing it has going for it is that if it failed it'd cause a systemic issue in gateway office markets so you think that landlords won't let them totally default.
Interesting point, would be curious what the vacancy rate in various urban cores would be if you assumed WeWork-leased space went dark... wonder if we're talking 25 bps or 5% (I have no idea).
According to their wikipedia page, WeWork manages about 10,000,000 SF of office space as of July 2017 in 471 locations that are in 90 cities for what that's worth.
I've been told they're 3%+ in Atlanta. Don't have numbers to back it up though.
Im excited to see all these VC funds and their companies throwing ridiculous valuations around implode in the next recession. Even the seed stage monkeys I run into are overpaying ridiculously for stock.... The series B and on guys are even worse. VC returns are already shit for non top quartile but I think they'll bottom out even harder in the next 10 years.
Do you think you are better than Masayoshi Son?
I think Warren Buffett is. :)
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