Dear all,
In a recent REPE interview I got asked about Co Working Spaces as emerging asset class. I was asked about specific yield and risks associated with the asset class.
I reckon that this is probably the highest yielding and riskiest asset class in the market right now?
Any input is much appreciated.
Kind regards
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Co-working spaces are still just tenants within the 'office' asset class. If you are buying a property that is 100% leased to a co-working company, then you better have a good grasp on that company's credit, business plan, etc... Co-working is here to stay, but it is a risky area right now straddling two bubbles: tech and commercial real estate.
Why would you assume they're the highest yielding or riskiest asset class?
Any lenders here have a favorable view of financing buildings that are 100% leased by a co working company. ?
That one building in Miami that is 100% leased to we work has been making the rounds for the past year and it comes across my desk every couple of months. If they cannot get financing for a year in a market where there is so much capital waiting to be deployed, it just tells me that the markets are not sure yet on how to treat co-working companies. The building here was treated worse than any other single tenant building.
I have seen both Co-Working PE investments and have seen buildings with Co-Working tenants
The tenants pay higher than market rent but when you sell the building it has a higher cap rate based on co working tenants.
The PE investments into a Co-Working company are asking you to throw money at a company that has negative EBITDA and every other couple spaces has a decent 4 wall EBITDA. You invest with the hopes of getting a valuation on revenue of like 10x to sell and I guess leave someone else holding the bag
So when you are looking for highest yielding yes as an office tenant but it hurts the value of the building
Highest yielding as a PE investment maybe if you can get your money out
As a Bond WeWork is a great high yielding junk bond if you think they will pay you back at par in 30 years.
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