Sam Zell weighs in on WeWork's office-sharing business model
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- Опубликовано: 3 сен 2019
- The We Company, formerly named WeWork, is getting ready to go public with the offering expected to come sometime in September. Sam Zell, chairman of Equity Group Investments, joins "Squawk Box" to discuss the We Company's office-sharing business model and its prospective IPO.
Fair disclosure... I am a real estate broker..
Having said that.
1. Most small leases I lost to co-working outfits , well they weren’t bankable in the first place. They couldn’t even afford the guarantee terms imposed by the lease.
2. They always came back to me. Issues with privacy and them getting nickeled and dimmed to death, once the novel wears out and they do the math, they realize they would be better off with a five year lease.
3. The local landlord with surplus footage could put up furniture and do the same. His cost basis other than the condominium, taxes , maintenance, and expenses furniture is way lower than the Co-Working can afford to. There is no floor rate cost since he already owns idle capacity.
So for landlords and small tenants WeWork does not offer much value. The revolving door and thin margins kills all pretenders.
Where WeWork makes its money.....
Large corporations and multinationals. That is it. They approach these companies with the concept of variable footage and no term lease contracts. If the client expands on headcount , then they can absorb floor capacity without commitment to 5,10 year lease contracts. If the same client contracts then, “ no problem, we are there for you. Just turn in the keys , no penalties.
There is a catch though. WeWork is not frugal to its leases. Even if assuming they haggle rates aggressively before signing off the lease , they always seek Class A prime real estate office , if not marquee buildings. So assume, for all intents and purposes, their margins ar not that great.
They are not using investor’s money to buy office buildings. They are hedging on rates and demand to stay afloat. This is not equity building business. They are just an oversexed and glorified subleter.
WeWork's income will directly depend on the health of the economy. If the economy is growing, perhaps WeWork will do good or has the potential to do good. As a recession comes, which will come and will come again and again, WeWork will lose business as there will be less need for leasing space for businesses. WeWork is tightly coupled with the health of the economy, and that is just not a good thing.
@@payamism When the next recession comes (most likely a depression) Wework will be Wefucked.
@@payamism it has nothing to do with the health of the company, it's a broken business model. They reported $1.8B in revenue in 2018 up from 886M the prior year. However their Net Loss more than doubled to $1.9B! Now imagine those numbers in a recession?!
@@timz6079 @Tim Miller so my question is, considering they use to have so many financial/accountancy/economy/departments all over the world, full of savvy experts on the matter, how is that no one ever told Adam or Miguel, the Co-founders, what was really going on or even worse, that Softbank CEO, which is supposed to be a real genius, how could have been so blind. .. I'm still struggling with this model of business, trying to figure out what really was.. Where the money really came from..how so many smart people could have possibly been mislead?.. To me is a complete mystery...
Acrually am the opposite to OP... they got margin but its shorter and flexible lease are fragile business model.. compare the space and rate one pays between wework vs hotel standard room..WeWork is high margin betting.
But they’re a tech company because their CEO has long hair
lol ikr
Lolll
lol and knows how to surf.
😂
Yes running a true SaaS company. Scam as a Service.
I love listening to sam. this guy has so much knowledge and experience^^and he tells straight the truth
The first three lines of the WeWork S-1 section called 'Our Story'
"We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness. We have built a worldwide platform that supports growth, shared experiences and true success."
I'm sure things will be just fine.
Karthik Subramaniam that’s just the way Adam Neumann speaks. He’s a little bit like Gandalf, except no beard and no hat. I wouldn’t judge wework on the quality of their prose.
@@segasys1339 Holy S***... I've been reading more about Adam Neumann, and you weren't kidding. The Clear favorite so far: In 2017, Neumann declared that WeWork’s “valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”
😂
To elevate the world's consciousness? Really? Lol, that's some Grandiose BS
haha - i saw that as I was walking and almost choked on a fly because my jaw had dropped
Zell offers the benefit of experience - "everyone else who tried this business model since 1956 has gone broke." Wow.
He looks like uncle Iroh in Avatar the last airbender 😂
Softbank sunk a ton of money into this garbage company. And they'may throw more money into it. The business model is ridiculous.
Lol well a good amount is saudí money. I think Uber long term will play out well if they come out on top with self driving cars. Otherwise it’ll just be Tesla and google with a few other smaller businesses competing for whatever market share is left.
And softbank money is investor money
Sam Zell drops a real knowledge bomb here, long term liabilities and short term assets. Too big too fail isn't even in question here, first downside cycle in the economy and they will be losing all of shareholders money. If they go public this is a long term short position.
I am currently reading Sam Zell's book "Am I Being Too Subtle?". I definitely see why he has a reputation for being so blunt and straight forward.
I have spreadsheets does that make me a tech business😆
Love sam Zella we need more zell
I can’t wait for it to IPO so I can start shorting. It’s rotten from the head down.
You gotta love Sam!
We're gonna see another snapchat situation. A spike on the first day of IPO , then a very sharp drop. Then the memes
I had to go back and listen to Sam after WeWork crumbled, he saw right through the WeScam
Spot on Zel!
2019-WeWork......2025-WeBroke
TheArtShow nope it went broke in December 2019
Feeling reminiscent of the 2000 bubble.
Love to hear Sizzle speak
Eventually, much of the "office work" can be done at home at all levels private to state, Federal government etc. Office space will be a thing of the past like big box stores is currently going through.
Government will always have offices bc they can afford it and have no reason to cut costs
@Fo Reel Nothing on the mobile devices.
Everything in cloud. What is to lose.
@kappelmeister123 Those employees who can make the cut will work out. Otherwise travel to office for the others or find another job.
@@deathlarsen7502 They can reduce the square feet. More fiscal responsibility will be forced upon the government by the voters.
Watching this video in 2022 confirms everything Sam says
So pathetic that we even have a conversation on gender. Its really sad that we have stooped to this level where its mandatory for women to have a role as CEO or board of directors. What happened to looking at someones resume and skillset? Its really the standard today for large companies to hire women to board of directors so they don’t receive negative feedback from news? Pathetic and wrong on so many levels. You want equality? This isn’t it.
Thomas Headley bahaha i bet your stay-at-home liberal feminist stepmom takes you to all the protests! This isn’t equality, this is telling companies they have to hire women. Great, what happened to looking at an individuals resume and skillset? You’re confused. I don’t want to avoid competition, I want the competition to be fair and based on merit. If you’re going to hire a female over me simply because its a female then that is not competition, that is sexist. Get out ur parents basement fuck boy
How long can they keep bleeding cash until investors pull out?
Aged very good. Wework dropped by 40% to 0.13 cents today
Lol I’m here back tracking
When you realise the WeWork office doesn't look anything at all like the formula they are selling to their customers. Look at those tiny and cramped desks with bland colours and understated designs :D
Tom R yep! I have a co work company and I built mine around the fact I thought people would get tired of them
Never dull
Refreshing, honest appraisal.
STEPHAN FEIBISH not at all low enough
Please keep this quiet. We Work will be a very useful short and market hedge.
Tell'em Sam!!!
Sam with the correct prediction! Wework has now filed for BK.
Wedontwork would be a more appropriate for this company.
Who thinks that in a recession wework would do better and not worse? Given that in a recession businesses with big offices would downsize to shared offices to save
NICOLAS AGUERO negativity around we work is astounding.. you are so right
A guy with a lawnmower is a tech company.
🎯 Key Takeaways for quick navigation:
00:00 🧑🏫 Harvard Business School professor Frances Frei joins WeWork's Board of Directors, addressing concerns about an all-male board composition.
00:13 💼 WeWork plans IPO Roadshow; CEO returns $5.9 million trademark fee, including stock sold.
00:28 🚩 Sam Zell critiques WeWork's governance issues and sharing economy; highlights corporate governance importance.
01:10 🏢 Zell emphasizes strong corporate governance, opposes multiple voting structures in companies.
01:51 📊 WeWork's extreme governance practices questioned; 20-to-1 voting rights and financial losses highlighted.
02:44 💰 Zell compares WeWork to historical cases of companies with similar models facing failure.
03:26 📉 Zell points out risks of co-working business model in economic downturns and oversupply situations.
04:06 🏢 Real-estate industry criticized for allocating non-credit office space, potential implications discussed.
04:59 🏙️ Concerns about WeWork becoming "too big to fail" and implications for stakeholders raised.
Made with HARPA AI
Too much of a hard sell. Something seems wrong here.
Why dont they just work from home?
And don't forget free beer!
Cheers mate, this comment aged like fine wine. Even before the pandemic hit, this was a thought engraved in so many young startups. Adam wanted to create a coffee shop where everyone must pay them to drink coffee or kombucha. It’s easier said now in retrospect, but it was clear as day even before the pandemic.
The difference between the others having stronger owner voting shares is that their actually making good money and is worth to the investors for the less voting power.
WeWork is just pretending to be an innovative tech company.
WeWork model is not bad, it is different. I dont agree with the founders behavior. However the model of renting an office building to rent to others is not terrible. This idea has been around in Europe for many years. WeWork should be priced lower from an IRR perspective than a typical hotel. Assuming the hotel owned the property then the annual profit margin is higher closer to 18% on average. If WeWork owns the property and can get a decent occupancy rate (say 85% annualized). If WeWork rents from a skyscraper (doesnt own the building), then WeWork will have a target IRR max to 13-15%. Its still a profitable business. But is 12% annual return that exciting considering the S&P 500 pays 10.2% ??
You got a good mind for business. WeWork is an amazingly profitable and successful company! lol
Wow he called it like it is, risky model risky outcome. The real prophet.
He sold some of his stake for $700 million. Clearly, he doesn't have confidence in his own business. He's more of a scammer than a strategist.
You're right. Not a scammer but a person I & many would not trust because of this behaviour
solid guy, as predicted
The very vicious cycle business model that cause a good economy to go bad!
Wework was always Crap thought. I m simple guy. Why would I rent office space when I have a home to work from. I always saw this as BS. If I m at home then needed to meet up with a client, business worker . Meet at Starbucks, mc Donald's etc., high end restaurant as needed write it off as expenses that's it. Sharing things make sense a car specially if I don't drive much or have a place to park at home, but wework never made sense. When it fails and it will, they will or someone will try to rebrand it. Lol for suckers lol again.
WeWTF
Anyone here in 2020 after coronavirus outbreak?
like listening to the future............................that's just arrived!
What people fail to realize is we work isn’t an office space company it is a community if they can build a strong enough community it will last a very long time
This is pets.com all over again
lol petsmart has that domain now
@@proletar-ian but it was once a hot new IPO that was losing a lot of money
he predicted the future.
Boom! Roasted @wework
Now we know what happened. Zell was right again.
14 seconds into the video and apparently that the board is all-male is relevant in any way is a bad sign
Zelle Quickpay ™
Scam 101
Lets ask the troll under the bridge what he thinks.
Notice how these VC backed companies are just repackaged, trendier versions of existing companies? The higher and higher valuation rounds are similar to a Ponzi scheme and at the end, with an IPO, public market shareholders are left holding the bag. Uber and Lyft are, admittedly impressive apps, but they use it for gypsy cabs (pardon the non-PC terminology). We is pretty office space but in a structurally unprofitable business model. Where is the SEC on these businesses? Why are the regulators not all over the banks underwriting this garbage, polishing turds to sell to the public?
I miss Sam…
This guy makes Soft Bank look like fools!
Jin yaaaang
Wow he speaks slow!
this dude looks like Mark Margolis
Money Laundering .
Everybody now. You're the only one that I want. You're the only one that I need. And after all, we're still strong. Together. Forever. You're still the one that I want. The one that I belong. For Life. ooh ooh Sway your hot bodies and catch the pellets in the air. They didn't put up a fight and they didn't even put up a fight. Standing in the light of your halo. Lalalala
Enron 2.0
Scam scam scam. Ponzi ponzi ponzi
The exchanges should be held liable for listing this PURE GARBAGE.
2023 wework file for bankruptcy