It’s not self dealing if everyone is on the same page. Neumann didn’t hide any of this. From SoftBank. From the public.
Neumann launched Flow, a residential real estate startup funded by the venture capital firm Andreessen Horowitz, in August 2022." (https://en.wikipedia.org/wiki/Adam_Neumann)"
This guy is just a greed engine at full steam!
Although to be fair, they seemed to be interested in scamming true crypto believers in that space, more than their partners, they'd get a bunch of shitcoins in the ICO and then offload them asap.
What's their advice to Neumann this time?
"I hope you are more discreet this time so your scam lasts long enough for us to exit"???
> A candidate who displayed empathy for the entrepreneur would answer the question about Neumann with something like the following, Horowitz said: "He did an unbelievable thing in that he built something that almost nobody has done, which is he built a consumer brand in commercial real estate." The person might add, "He told that story so beautifully that he was able to raise a gigantic amount of money and fund this incredible growing operation."
People never like to be told they’re mugs
I'm not astonished: WeWork made VCs lots of money - not counting SoftBank as they were the unsophisticated marks/bag holders.
https://www.businessinsider.in/wework-ceo-adam-neumann-has-r...
Unless it was a 0% fixed interest only for 100 years or something crazy.
Feels like a better scenario than that money spent on parties or a datadog bill.
> 200 Sears locations were sold to a REIT and leased back to the retailer.
https://therealdeal.com/national/2021/10/21/the-man-who-raid...
I understand they're currently liquidating it, TBD if the common stock investors see anything left after BH gets paid back (and then preferred stock holders, currently trading pretty close to par)
edit: REIT has been converted into a C-Corp, possibly to carry-forward losses better as it becomes not-a-Sears-property owner? https://therealdeal.com/new-york/2022/07/08/seritage-growth-...
Most retailers, banks, and companies realized that owning realestate is not part of their core competency. Canadian tire rolled their realestate into a REIT and then rents the locations back.
There's no double dealing or anything nefarious about it. Heck there is a huge company called Brookfield that has made a living out of buying commercial realestate from companies and renting it back to them while spining the realestate out into a REIT.
That's just smart business for the company who gets money upfront and a stable knowing rental price.
Most commercial tenants are still resonsibile for maintenance, which is the primary ongoing expertise.
It can be a useful way to free up capital, but only useful if it's used to expand the business and deliver a greater return.
Too often it's used to artificially increase the share price or pay out dividend. In these cases the company commits to never ending rent payments for no actual benefit.
There are whole bunch of businesses who have bucked this MBA trend, kept their freeholds and have ended up with a more resilient business better able to weather a change of economic circumstances.
Edit: haha j/k they also went bankrupt.
For customers, it should still be relatively the same service. I expect some amenities to change, but you should still be able to rent a desk (for at least the near term).
You're not allowed to eat food or bring your own drinks into the common areas because they want you to pay for their overpriced coffee and sandwitches. The coworking space closes at 5 and you have to leave. It opens at 8:30 and you can't enter before then. They will randomly close half the common area because someone rented it for a party. In the private office there are no power outlets at the desk. There is exactly one hookup place in the middle of the floor and we have extention cables everywhere. Despite paying (way above market) for a private office only a limited number of preaproved people are allowed to use it, anyone extra has to have a spaces subscription too. Despite allegedly renting the private office we are not allowed to use our own furnature, or electronics, or place anything on the walls (we can, but this would be paid extra).
Overall, it looks nice and has a nice view but once you see the rulebook it becomes an extremely unwelcoming experience.
I do have a dedicated desk in a standard Regus location and for the most part, it’s fine. Unlimited access 24:7, clean kitchen, etc. Unlike WeWork, the coffee machine isn’t free and there isn’t an on-site barista, but I don’t care about that anyway. No weird rules about food or anything else.
I asked around and apparently the same is true for all "special" meals, I thought it was interesting. Finding some related data to analyze has been on the back of my mind for a bit now.
And yes, often people are just okay with you bringing your own. I guess it works everywhere except prison, based on SBF.
Their mother company iwg PLC has less than stellar reviews on trustpilot.
https://www.trustpilot.com/review/iwgplc.com
Am I missing out by looking elsewhere? They were by far the cheapest and most flexible, but I don't have time to deal with administrative bullshit and protecting myself against predatory sales.
I have heard negative experiences from people renting an entire office, but I only rent a desk.
Not really:
https://globalinsolvency.com/headlines/iwg-plans-set-regus-i...
Guess which other companies filed for chapter 11 bankruptcy? Sears, BedBath&Beyond, and Circuit City. I don’t see them coming back at all.
Not saying that there is no possible comeback from chapter 11, there is. But seeing a chapter 11 filing and assuming the company will get out of it just fine is a bit preposterous.
Most of the time, the whole point of “reorganization” under chapter 11 is to keep generating whatever cash flow they can in the process, to make sure the creditors recoup as much of their investment before the (most likely inevitable) shutdown and the operations are wound down as gently as possible.
General Motors, American Airlines, Marvel Entertainment, Hertz ...
0. https://www.forbes.com/2008/09/25/chapter-11-bankruptcy-ent-...
I do agree, a lot of the media is saying this is a tactical move to re-negotiate a lot of expensive leases and they plan to get out of chapter 11 when they do.
The reality might be that there are enough co-working spaces and you can paratroop into anyone and check before hand that it meets your expectation. There is nothing to franchise.
What’s next? We gonna SWAT into Hartford for an insurance sales conference?
To say the least. I recently signed up for an office at a Regus location with the explicit purpose to incorporate a company there. All went well until a few weeks later when I went there to pick up post for the company and was told I was not allowed to do so until I had submitted a particular document. Only problem is that this document can only be sent to the registered company address by post. The woman in the reception literally had the document they needed in an envelope behind her desk but could not give it to me until I had submitted that same document. Zero understanding or willingness to escalate the issue to make an exception, just hiding behind "process".
In the end I managed to get in touch with someone else in the organization who realized how ridiculous the situation was and convinced them to make an exception so I could hand in the document but I'm not impressed at all by the company, to say the least.
Tried to book an office for my sister’s exam in a city with Regus but no WeWork and had to get a hotel room instead as we couldn’t figure out how to actually book any space. There was just a fill out a form and we will call you option.
Could allow CRE landlords to fill space temporarily, much the way pop up shops, sample says, food halls and halloween stores do..
Much better business model to just take a cut of a fee than take on all the lease risk for a startup.
It worked when investors didn't care about losses because the losses were hidden as technology investments that they thought would get smaller with scale.
I'm not sure how this would've worked out for WeWork.
[0] https://www.google.com/search?q=youtube+mcdonalds+you%27re+i...
Ford is a pension fund that happens to make cars.
Berkshire Hathaway is an insurance company that makes a lot of investments.
A supermarket is a bank that sells food.
GE at one point was also more or less a financial company that sold industrial goods.
I guess the thing is once you take a financial view of how a business works, a lot of things don't look like what they normally look like.
At the time of the construction of WeWork's business model, actually being on the deeds would have been seen as reducing the risk profile (by not being beholden to variability/increases of renting). At the time, private capital would have seen being on the deed as a low risk benefit to the business plan.
Obviously how we think about commercial real estate, particularly 'downtown' office space has changed heavily and it seems like wework for whatever reason was unable to pivot. It's arguably very difficult to move the direction of that much capital on w you've made the opposite argument and are already holding the bag.
Thats a good question. I wonder if security (hidden cameras and network and stuff) could be a reason.
I'd be curious to know how this trajectory played out past the IPO blunder, but at the time they were already focused on the "enterprise" model of being the best place for a large firm to go to source/spin-up offices around the world (where in some sense you could understand the coworking spaces as dogfooding their own systems of vendor/space management for quickly spinning up and operating office space around the world). I.e. rather than either having to maintain profitability at a global network of coworking spaces or whatever franchise model you become the outsourced office team for the world's largest/high growth firms, who want to focus on their core competence not sourcing furniture vendors in China.
Rather than partaking in the joy of mocking WeWork's obvious hubris leading to their downfall, I think the interesting question, especially in this time of high interest rates, is what this bankruptcy signals for the future of "tech-accelerated" firms that want to primarily focus on the real world not software (ie without marginal cost of 0) -- who want to achieve the exponential scale of software yet who have to operate with the margin/cost structure constraint of a traditional firm. Tesla/SpaceX are of course the big success here, but I doubt we'll see anything equivalent until interest rates are back to 0...
I guess it's all about where and when you draw the boundaries, Mush has just managed to lose $20bn on "X" so the Tesla/SpaceX empire may not be counted as a big success for ever.
WeWork could have succeeded with the franchise model you describe or the focus on being a flexible leasing option for enterprise… but we wouldn’t have heard of them, that wouldn’t be the WeWork we ever knew. WeWork only became big because of the mythology, otherwise it would just be a nicer Regus… which existed before WeWork and will exist long after.
WeWork’s core business was mythology, like Uber, and every other “technology” business from the 2010s. You can peel back all the bullshit and say that their “core business” was good but it was all the bullshit that made WeWork, WeWork.
The beauty of this idea is that they could make some money while all of this settles out, and then it would pave the way for another PE to come along and start rolling up all of the most profitable locations until they re-consume all the properties again.
Shifting the revenue to a franchise model seems like it solves the majority of their lease issues, and still lets them be useful, even in smaller markets. Their value, IMO, is in the "seamless" experience. Knowing I can paratroop into a city and will have a space to work that's of a consistent quality is great, someone sell me that!