Specialist
Former VP at WeWork Inc
Agenda
- Operating environment for WeWork (NYSE: WE) and coworking providers, and reflecting on current WFH and return-to-office trends
- WeWork's operating model – cash flow sustainability and product demand
- WeWork’s recent management changes and potential geographic pivots
- H2 2023 outlook – expectations for expense control and funding
Questions
1.
Much has gone down for WeWork in the past quarter, as seen in its Q2 2023 earnings, which revealed “substantial doubt” over the future of the company with it essentially saying its outlook depended on a series of plans, including further restructuring and a search for additional capital over the next 12 months. How we should be viewing and prioritising the different structural challenges facing WeWork today?
2.
Taken alongside the rest of this report, what constitutes substantial doubt? What challenges is WeWork facing across its balance sheet and how would you prioritise them?
3.
Do the recent departures of CEO Sandeep Lakhmi Mathrani and the subsequent CFO contribute to the suspicion that bankruptcy might be WeWork’s only route out of this situation?
4.
Sandeep and his immediate team were largely touted throughout 2022 to have brought some stability to WeWork relative to its past. How much of the company’s mismanagement do you think falls to the board?
5.
We frequently hear both from newsflow and from previous Interviews with former employees from WeWork [see WeWork – Distressed Sales & Turnaround Viability – 6 July 2023] that around 69-71% physical occupancy was often quoted as the goal, and if the company reached that level of occupancy, it would be profitable. We know that profitability never happened and that these Q2 earnings report 72% physical occupancy, which still didn’t seem to offset the company’s losses. Is this reflective of co-working being a faulty concept or is it attributable to its particular strategy, model and approach?
6.
We’ve already begun to see some of WeWork’s former landlords defaulting on their assets. How many more former landlords of the company do you expect to also succumb to the pressure of essentially no cashflow and ability to service debt, much of which is maturing in the next 1-3 years?
7.
Is there any chance of a turnaround for WeWork if the status quo environment remains the same? Or is the company’s fate resting on an external force, such as a mass pull-back on WFH or a drop in interest rates?
8.
What would you expect in a Chapter 11 scenario? We’ve already seen WeWork cut down on investments that were deemed not necessary to the mission under Sandeep’s leadership. At this point, what’s left to restructure and what scenarios do you see taking place over the next 2-3 months, if bankruptcy is declared?
9.
What type of haircut-to-value would any of WeWork’s assets undergo in a bankruptcy situation?
10.
What does a right-size footprint look like for WeWork? How many leases would it look to drop?
11.
When you talk about WeWork downsizing in Europe and potentially spinning off that business, would you expect the company to potentially hold on to any portion of its Europe market share in the same way you described how Miami is somewhat of a stronghold?
12.
Would anyone want to buy WeWork, given the liabilities that come with it? If so, what type of profile could you potentially expect coming in?
13.
Is there any possibility that WeWork’s leases could essentially be turned into contract-sharing agreements?
14.
Across the market performance of WeWork’s closest peers, IWG’s equity performance has been rather flat, at least over the last year, and we aren’t able to see Industrious’ results. Can we assume that the market still has faith in the co-working model, just not under the approach used by the company?
15.
Is the future of co-working to frame products more as a fill-in satellite space a central HQ?
16.
Does the potential extent of damage of a WeWork bankruptcy warrant regulatory intervention, whether on the federal or state level?
17.
What are your timeline predictions for when commercial real estate will realise the extent of the pain that’s been foreshadowed for so long? WeWork has been called the slowest-moving train wreck.
18.
Do you hold any contrarian views on WeWork? What’s your near- and long-term outlook for the company, if a long-term one is even possible? What are your base- and best-case scenarios?
