WeWork doubles losses as IPO approaches

WeWork doubles losses as IPO approaches

9 August 2019

WeWork Australia has more than doubled its losses from the previous year, while racking up $920 million in leases.

WeWork has aggressively expanded its portfolio of leased properties in Australia, including a $21 million acquisition of China’s Naked Hub and a new lease in Perth.

At the same time, the company’s outgoing rent ballooned from $12 million in 2017 to $30 million, while occupancy and infrastructure costs, and administrative expenses doubled to $10 million apiece, reports The Australian Financial Review.

These costs have outpaced the two-fold growth in revenue from membership and service, which increased to $49 million over the same period. A large part of this growth has been attributed to WeWork doubling down on enterprise members, who now represent a third of total space and are fastest-growing segment of WeWork’s membership base.

Between December 2017 and December 2018, WeWork’s memberships involved larger deals with longer deal terms as well as more global accounts.

Up to three-quarters of all tenants occupying 30,000 square metres or more across their portfolio intended to cut their traditional leased office footprint, and all planned to increase their use of co-working space, a CBRE report last year showed.

WeWork’s comprehensive loss for the year totalled at $7.2 million. Its losses were $2.9 million in the previous year. Meanwhile, the company’s future lease commitments have blown out to $920 million.

This figure, which is up from $253 million in the previous year to December 2017, is the sum of rent that WeWork has agreed to pay on its Australian portfolio. One-third of the amount is payable in the next five years.

These commitments are not recognised as liabilities for the company, which otherwise booked $100 million in current and non-current “deferred lease liabilities”.

The parent entity WeWork Companies Inc has provided its Australian arm a loan payable of $63 million but has agreed to “not demand repayment … until [it] has the financial capacity to repay”.

It has also agreed to “provide ongoing financial support to ensure the Consolidated Entity and Company can continue to pay its debts as and when they are due”, the records show.

The parent company WeWork is itself loss-making and issued some $US700 million in junk bonds in 2018 to sustain its growth strategy. The company is reportedly targeting a share sale of around $US3.5 billion in an initial public offering in September, along with $US6 billion of debt financing.