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It may be also of interest to note that WeWork's leases with their landlords are not signed with WeWork Inc, but instead with limited-liability subsidiaries tha
by fanzhang 8y ago
It may be also of interest to note that WeWork's leases with their landlords are not signed with WeWork Inc, but instead with limited-liability subsidiaries that WeWork owns.
This means that when the cyclical tenants leave, WeWork is not left with the whole bag; instead, its landlords are.
When the tenants of a building stop paying, WeWork would default on that subsidiary, but WeWork corporate would not default.
This was hugely surprising to me when I first heard it.
- dogma1138 8y agoThis isn’t that uncommon especially in high risk industries it can increase your overall tax liability depending on the exact structure but reduces the risk considerably.
- pm90 8y agoWhy would a landlord accept these terms? Isn't the landlord increasing their exposure to financial default? And if the parent is true and they are operating in premium markets, there should be a lot of other willing tenants right?
- YokoZar 8y agoYou may have answered your own question. If you can relet the space more easily when WeWork Subsidiary LLC breaks the lease, then the landlord's default risk is reduced. Plus, maybe there's a large deposit.
- fanzhang 8y agoA lot of other potential tenants are small anyway and have the same problems as WeWork Subsidiary LLC -- they can default and go under.