The fall of WeWork shows the deepening cracks in property
Since it was founded in 2010, WeWork has not once turned a profit. For years its cash-torching ways went unchallenged, thanks to the reality-distorting powers of its flamboyant founder, Adam Neumann, who succeeded in convincing investors, most notably SoftBank, that it was not an office-rental business but a zippy tech firm on a mission to “elevate the world’s consciousness”. Its slick office spaces, complete with free beer and table football, sprung up around the world. At the height of the silliness in early 2019, in the lead-up to an initial public offering (IPO), the company was valued at $47bn.
The unravelling began soon after, as outside investors balked at its frothy valuation and questioned an unorthodox governance arrangement that gave Mr Neumann an iron grip on the company. The IPO was shelved, and Mr Neumann was offered $1.7bn to leave. Sandeep Mathrani, a real-estate veteran brought in to run the company, did his best to right the ship by cutting costs and renegotiating leases. In 2021 he listed the firm on the New York Stock Exchange through a special-purpose acquisition company, at a valuation of $9bn. Yet his efforts were undone by the slump in the office market brought on by the pandemic and an enduring shift towards remote working. On November 6th WeWork, which leases offices in 777 locations across 39 countries, filed for bankruptcy. Its equity will probably be wiped out.
WeWork is not the only property business in turmoil. Days earlier, on the other side of the Atlantic, René Benko, a once celebrated Austrian property magnate, was ousted from Signa, the €23bn ($25bn) real-estate empire that he had built over the past two decades. Its portfolio includes icons such as the Chrysler Building in New York; the KaDeWe, a posh department store in Berlin; and a stake in Selfridges, another ritzy temple of consumption in London. It also includes luxury hotels, such as the Park Hyatt in…
2023-11-07 16:41:24
Post from www.economist.com
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