This article is from the Australian Property Journal archive
HAVING been valued at US$47 billion and recently been preparing for an initial public offering, co-working space poster startup WeWork has been taken over by Japanese tech company SoftBank as part of a rescue package worth US$8 billion.
Already WeWork’s largest investor, Softbank – which has already invested more than US$10 billion – will own 80% of the startup, and Marcelo Claure will become executive chairman. WeWork founder and chief executive officer Adam Neumann will retreat with as much as US$1.7 billion in his pocket to a “board observer” role.
WeWork has been at the forefront of the co-working space boom and now has more than 500 locations across around the world. The group typically rents and renovates space, which it leases to companies and individuals.
However, the startup never turned a profit and gained a reputation for burning through cash, losing about $900 million in the first half of this year. Concerns over its governance and founder Adam Neumann’s leadership style ultimately led to a tepid reaction to its share offering, plans for which were shelved last month.
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.
In Australia, WeWork’s expansion has recently seen it sign up for 11,000 sqm at 320 Pitt St in the Sydney CBD on a 12-year deal.
The site will be WeWork’s 15th in the country, and 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.
WeWork’s more recent 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.
According to CBRE, agile space take-up accounted for 17% of national net absorption in Australia through 2018. Co-working and serviced office providers currently occupy about 156,000 sqm, accounting for about 3% of stock.
In a company statement, Softbank chairman, Masayoshi Son said, “Softbank has decided to double down on the company by providing a significant capital infusion and operational support”.
“SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work.”
It is believed SoftBank plans to accelerate a US$1 billion agreement scheduled for April.
According to the Wall Street Journal, Neumann sold hundreds of millions of dollars worth of stock in earlier funding rounds.
He has a $500 million credit line secured against WeWork shares from UBS Group AG, JPMorgan Chase & Co. and Credit Suisse Group AG, with around $380 million outstanding at the end of the 2019 financial year. JPMorgan had loaned him $97.5 million.
