Business

WeWork prepares for Wall Street debut to raise fresh capital

NEW YORK With its free coffee, couches and glass partitions, shared workspace start-up WeWork has shaken up both office culture and commercial real estate.

Brushing aside questions about its business model, the New York outfit shows no signs of slowing down and is now preparing for its Wall Street debut to raise fresh capital.

As recently as this month, WeWork was seeking to tap credit markets for US$4 billion (S$5.4 billion) to expand its footprint in the market for co-working, according to The Wall Street Journal.

When the French start-up CybelAngel wanted to open a New York office, WeWork was an obvious choice.

With only basic furniture, their current space overlooks Manhattan'sFifth Avenue, with a corner office next to a small conference room.

"It's not cheaper" than a traditional office rental, said Ms Jocelyne Attal, CybelAngel's head of operations in New York.

"But we don't have to make a three-year commitment."

She added: "There's security, a reception desk, the building codes are met, there's housekeeping. We don't have to take care of anything."

The free Monday breakfasts and Thursday drinks don't hurt either.

When the company first appeared on the scene in 2010, the co-working concept was only starting to gain traction thanks to new technologies allowing professionals to work remotely.

And the global financial crisis actually helped business, as it drove financial and creative professionals to launch their own startups.

"WeWork was the first to really gravitate towards all the demand from first time entrepreneurs and small business," said Alex Cohen, vice-president at the Compass real estate firm in New York.

At WeWork spaces, all office supplies and utilities are provided, right down to Internet connections and printers. And the decor, a blend of bright colours and industrial themes, appeals to millennials.

But the company also has attracted interest from major companies like Microsoft, HSBC and Facebook.

Companies with more than 500 employees represent 40 per cent of WeWork's clientele.

The company now manages 485 locations in 28 countries - often entire levels split into separate offices, common spaces and individual work spaces that WeWork furnishes and sublets.

In a recession, the tenants will tend to clear out.

Real estate market players recall the misadventures of a company called Regus - now an office space and co-working giant known as IWG - which nearly went bust following the tech crash of 2001.

And questions linger about whether WeWork's business model is sustainable.

The latest estimates value it at US$47 billion even though it continues to burn cash: US$1.9 billion in losses last year with revenues of US$1.8 billion.

IWG's revenues were almost twice as much last year, and it is also profitable and has US$4 billion market capitalisation.

WeWork has ventured into new areas like residential apartments and education and tells investors they should see its quarterly losses as investments.

"We really want to emphasise the difference between losing money and investing money," chief financial officer Artie Minson told CNBC.

"At the end of this quarter, we have these cash flow-generating assets." - AFP

BUSINESS & FINANCE