This article is from the Australian Property Journal archive
CO-WORKING poster child WeWork has reported a quarterly net loss of US$1.25 billion (A$1.84 billion), a week after white knight Softbank fast tracked US$1.5 billion to the company.
The result is more than double the loss of $497 million reported in the same quarter last year. According to financial documents obtained by Bloomberg, the company also recorded revenue of $934 million for the quarter, up from $482 million a year earlier.
The documents also showed WeWork had cash on hand of $2 billion as of September 30.
The revelations come after Softbank advanced a $1.5 billion payment to the company last week, originally due to be paid next year, following reports that the company was running out of cash due to its rental obligations including at least £863 million in new leases in the UK alone in the past 12 months.
Early last year, documents obtained by the Financial Times and Bloomberg showed WeWork occupied more than 1.3 million sqm of office space globally, and owed $18 billion in rent – although WeWork has the option of closing the offices if it cannot meet its rental obligations. Some US$47 billion in future rent payments is due, and WeWork is already planning to shed 2,000 employees from its 12,000-strong workforce.
SoftBank is reportedly looking to lay off 4,000 people or 30% of WeWork’s workforce.
Meanwhile South China Morning Post reported that WeWork is considering surrendering a portion of a recently signed lease in Wan Chai in Hong Kong.
The failed WeWork IPO saga and reports that some coworking companies in China are having trouble servicing debt has forced investors to reconsider the risks relating to the structuring of coworking lease agreements, according to a Urban Land Institute (ULI) and PwC.
Recently operator Kr Space reneged on an agreement with Chinachem to take seven floors in One Hennessy in Wan Chai.
The report said given the sheer volume of coworking space now on the market, these risks apply not only to coworking operators, but also to building owners and potentially also banks that have financed the purchases of buildings in which there are large concentrations of coworking facilities.
In Australia, agents are also quietly expressing concerns. Industry sources told Australian Property Journal that if WeWork wound back and closed some offices locally, it will have an impact on the office market, particularly in Sydney where the company has a big footprint.
“Over the last three years landlords have been jostling, throwing everything but the kitchen sink to bring WeWork to their buildings, outlaying capital on upgrades etc.
“WeWork brought a cool factor to an office building, helping landlords attract other tenants. We don’t know the terms each landlord agreed to, but if WeWork has the option of walking away if it cannot its rental obligations, what will happen to those buildings?,” the agents said.
The co-working company is about to open its 15th co-working office in Australia. WeWork’s expansion saw it sign a 12-year deal for 11,000 sqm at 320 Pitt St in the Sydney CBD on a 12-year deal.
Last year, its 10-year lease commitment spurred Sydney developer Philip George to undertake a $50 million upgrade of the 7,300 sqm heritage-listed 66 King St office building.
WeWork’s other Sydney locations include 4,100 sqm of Sumner Capital’s 50 Miller St, and the entirety of the 10,000 sqm office component of the timber Daramu House building in Barangaroo South.
Its first Perth location of 7,900 sqm will open in September. It recently signed another 12-year lease over 4,600 sqm at 260 Queen St in Brisbane from global real estate firm Hines.
