WeWork, the $10 billion startup that leases space to startups, has bigger ambitions: it wants to rent you a "co-living" space where you work, too.
WeWork is busy launching its co-living apartments — known as WeLive spaces — in places like New York City and Washington DC, The Information reports.
Its first two co-living buildings could open this year, though an investor presentation about WeLive suggests profit margins will drop since WeLive spaces will be bigger than WeWork's office spaces.
In the case of WeWork's Crystal City WeLive location, the company will ultimately be renting out 360-square-foot "micro apartments," which sit on top of WeWork's co-working spaces, BuzzFeed reported earlier this summer. WeWork will offer more than 250 micro-apartments at that location, along with amenities like bike parking, an herb garden, and a library.
That same investor presentation from The Information says it hopes to find success for its co-living endeavors by developing partnerships with developers and landlords.
Its five-year forecast predicts "WeLive will have 34,000 members in 2018, living in 69 WeLive locations, with per-member revenues of $1,988 and $100 in services," according to The Information. "Overall by that point WeLive is projected to generate $636 million in revenue, or 22 percent of WeWork’s total revenues, and $158 million in income before selling, general and administrative costs, taxes and depreciation."
According to this presentation, WeWork would charge its 962 co-living members $1,786 per month, with an additional $50 monthly fee.
Earlier this week, an investor presentation obtained by The Information raised some questions about WeWork's long-term financial model.
In the presentation, WeWork projects a 2018 operating profit of $942 million on $2.9 billion in revenue, a big increase from the $4.2 million in operating profit on $75 million in revenue it expected in 2014.
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.
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