WeWork, a startup that leases office space to other startups, is now worth $10 billion, but an investor presentation obtained by The Information suggests the long-term financial situation of the company may be perilous.
In the presentation, WeWork projects a 2018 operating profit of $942 million on $2.9 billion in revenue, a far cry from the $4.2 million in operating profit on $75 million in revenue it expected in 2014.
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This rosy picture is based on the assumption that WeWork will drastically increase its membership and revenue per member, but the report exposes several financial details that could cause alarm for investors.
WeWork’s near-term costs appear artificially low because of large initial concessions from landlords, The Information reports. WeWork is locking itself into longer lease deals than is usual in the industry, and getting benefits from doing so such as initial free rent.
An example The Information gives is that of a 20-year lease signed in New York’s financial district, on which WeWork got over a year of free rent. This free rent, however, was not spread out over the length of the lease, as is usually standard accounting practice. Instead, it was plugged straight into the current numbers, increasing near-term profits.
Read the full story at The Real Deal Miami by sffreelance
Adam Neumann, WeWork
