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What’s wrong with having $18B in rent? Seriously. WeWork is in the same business as what Hertz is in for cars. They rent out an expensive asset (eg commercial
by alberth 9y ago
What’s wrong with having $18B in rent? Seriously.
WeWork is in the same business as what Hertz is in for cars.
They rent out an expensive asset (eg commercial real estate and automobiles)
Hertz has $21B in liabilities [1], which is largely comparized of paying financing charges for all of those Toyota Camrys they rent out.
Yet they are still profitable.
[1] http://financials.morningstar.com/balance-sheet/bs.html?t=HTZ®ion=usa http://financials.morningstar.com/balance-sheet/bs.html?t=HT...
- et-al 9y agoThe concern is that real estate fluctuates more than automobile prices. If the market tanks and rents go down, then WeWork is locked into overpriced rates. They have contracts until 2022. Yesterday's discussion [0] did point out that WeWork leases from an LLC subsidiary that leases from the actual building owners. This would shelter WeWork Corp in an odd corporate structuring sort of way (similar to McDonald's making money off real estate). [0] https://news.ycombinator.com/item?id=16913110 https://news.ycombinator.com/item?id=16913110
- i386 9y agoThere's some bargaining power on the lessee going on here too. The way I've heard it works is that they would lock in for a number of years at a reduced market rate. The longer a tenant is contracted in, the risk of the building being empty lowers for the owner. This allows a lower price per month to be negotiated because on average the building isn't going to be non-revenue positive. Now, if property prices take a dive, I'm not sure that would impact WeWork's business all too much as their main clientele are solo entrepreneurs or small startups that couldn't otherwise afford an office fit out and/or the risk of taking on a lease. There is more value in WeWork than just the building.