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> WeWork forms a subsidiary to represent each lease deal, which means individual locations could fold without leaving the company itself with much risk. The par
by pimlottc 8y ago
> WeWork forms a subsidiary to represent each lease deal, which means individual locations could fold without leaving the company itself with much risk. The parent company only guarantees the lease for about six to 12 months on a 15-year agreement, according to documents associated with WeWork’s inaugural bond offering.
So, they sign a 15-year lease but are only on the hook for the first year? How does that work? Sounds more like a year lease with an option to extend?
- crazygringo 8y agoThe subsidiary signs the 15-year lease, not WeWork. So basically if the location turns out to be unprofitable, the subsidiary goes out of business or goes bankrupt and WeWork isn't stuck with the lease. From the landlord's perspective, yes it is basically equivalent to a year lease with option to extend... not totally clear why the landlord would agree to that.
- jfoutz 8y agoBecause money. This is restaurant expansion 101. In this specific case a large sophisticated organization may be exploiting an unsophisticated organization, but really this is standard operating procedure for any franchise.
- gowld 8y agoMust be nice to be an immortal corporation that can just spin off any debts you don't want to pay, while mere mortals with finite lifespans and education debt and medical debt and credit card debt cannot unless we die.
- tonysdg 8y agoFairly certain at least some of those debts can get passed on to your estate and/or children.
- kortilla 8y agoYour estate is just your assets, so yes to that. Your children, not in the US. You can never involuntarily inherit debt in the US. You have to be a co-signer to begin with.
- skh 8y agoIn some states for certain medical expenses family members can be forced to assume the debt.
- kgwgk 8y agoInteresting. But strictly speaking you’re not inheriting debt. You were liable for the debt all the time.
- skh 8y agoI would agree with that assessment but for the fact that while alive the parent's medical debt can't be forced upon family members. It's a weird debt and I agree it isn't quite the same as inheriting it but I also think it isn't the same a jointly assumed liability while the parent is alive. The family members presumably have no say in whether or not the parent assumes the medical debt.
- RhodesianHunter 8y agoWhat if I told you that you can create and own corporations too?
- kevin_thibedeau 8y agoYes doctor you can bill that ultrasound to my LLC...
- apatters 8y agoYour comment seems disingenuous. What if I told you that piercing the corporate veil is regular and common when a single member LLC can't pay its debt, and an LLC isn't eligible for things humans need to improve their futures like student loans anyway?
- kortilla 8y agoYou do know that it’s people who setup these subsidiaries right? There is nothing preventing you from doing this as an individual as well. The hard part isn’t the subsidiary or LLC, it’s getting the counter party to enter into an agreement with an entity containing no assets or long term viability.
- ksec 8y agoI am not sure if that is evil or pure genius. But why is the subsidiary allowed to release it to WeWork? I mean by that theory I could open up 100s of Restaurant and close each of them that is not performing?
- donedeals 8y agoWework Brooklyn #22 LLC signs the lease with the landlord and thus is responsible for the lease obligations. Wework LLC (proper) guarantees these lease payments for only 6- 12 months of the lease. After this time the only party responsible for the lease is the LLC that was formed. Landlords are likely agreeing to this only because Wework would never be able to sign a lease with any owner if they defaulted on a location.
- dsr_ 8y agoWhich sets them up for WeWork subsidiaries to default on any building that's more than X months old and unprofitable. That's a terrible deal for the landlord, if the landlord priced it as a 15 year deal instead of a one year. Absolutely great for WeWork. Terrible for anyone who wants offices, since WeWork will sit on a large chunk of the market.
- RhodesianHunter 8y agoIf WeWork subsidiaries were defaulting right and left they wouldn't be able to get these deals. They aren't, so they are. Your comment seems to imply that the landowner has no choice.
- lancesells 8y agoAgreed. If, and when, they default it would most likely make news in the real estate / tech sector. Something seems too good to be true here but so far they haven't closed any locations.
- blackstrips 8y agoMaybe WeWork is picking up left-over locations. Some rent is better than no rent. If the landlord could find a better tenant, WeWork would have zero chance to rent any of it.
- pl0x 8y agodonedeals is another fake account from wework.