We at Wharton Property Advisors are real estate advisors and not investment bankers, so we will leave the analysis of the initial public offering valuation and process to others. However, it strikes us that the recent gleeful reporting about the potential decline and fall of the WeWork empire is greatly exaggerated and totally misses the mark regarding the future of the underlying business, whatever the future capital structure turns out to be.
1. The undeniable fact is this: WeWork has created a great product for which there was and is tremendous demand with almost $2 billion in annual revenues that have revolutionized the office leasing business around the world. Moreover, both solo entrepreneurs and big companies alike have wholeheartedly embraced the flexible workspace concept, whether or not they are in a WeWork space. This trend creating a new workplace community is here to stay, and we are the better for it.
2. From the perspective of a real estate broker, the IPO, the SoftBank fallout and the owner’s excess are interesting but don’t change the quality of the product. Regardless of what happens in the coming weeks and months, the workplace has already been transformed. As a result, this crisis actually represents an enormous opportunity for WeWork to put its house in order before going public rather than after so that it does not repeat the Uber debacle.
3. If its leadership is smart (and they surely are) WeWork will embrace these growing pains as a critical stage in its maturation process. Improved corporate governance, disinterested oversight and a ban on transactions favoring insiders can only improve the company and its brand. Further, wacky ideas for utopian living experiences outside the office should now be cast aside.
4. The really hard work has already been done. WeWork has transformed the office leasing and business world. The recent valid public criticisms will hopefully force the company to improve its business practices so it can move on to the next stage of its development with updated best in class policy. That is management 101, and you don’t have to go to Wharton to know what is needed when the owner’s whims are indulged at the expense of the entire company and its stakeholders.
5. So don’t miss the forest for the trees. It took true genius to create WeWork. The demand that genius created is only getting bigger. And that is the most important part of the current WeWork story – not its temporary setback in the capital markets and management follies.
What is your opinion on this fascinating saga? Please let us know what you think.
Counselor of Real Estate
Fellow of Royal Institution of Chartered Surveyors