35 ms·

And what about the buildings he leases to We? Or what about his wife?

onlyrealcuzzo 7y ago
I'm interested about the buildings. A lot of people bullish on WeWork say -- "Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings." Adam got a $750M loan from WeWork, right? I'm assuming he used that loan to secure more loans to buy the buildings he then rents back to WeWork (at a profit). I wonder what happens to him if WeWork walks away from his buildings. I doubt he has the cash to hold onto those buildings for more than a few months without a client -- especially if WeWork is still private. If they go public before they "walk away" from his buildings, he'll have to sell massive amounts of stock to cover his losses. Unless we get to negative interest rates, I don't see a future that looks good for WeWork.
- somebodythere 7y ago
  How do the negative rates benefit WeWork?
  - WJW 7y ago
    Because they are net borrowers and lower interest rates mean they have to pay less interest.
- kerkeslager 7y ago
  > "Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings." Ugh. What an awful culture we live in where this is considered perfectly normal behavior.
  - woah 7y ago
    Limited liability is a great concept which allows businesses to be run by people who don’t have the personal capital to absorb all possible losses of the business. Our society would be more unequal without limited liability. There are also many legal safeguards in place to prevent it being used for fraud, negligence, etc. Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
    - kerkeslager 7y ago
      > There are also many legal safeguards in place to prevent it being used for fraud, negligence, etc. You're doing a thing which is quite frequent on HN, which is where you say that unethical behaviors are prevented because some narrow definition of those unethical behaviors is illegal. But the bit I quoted above is an unethical behavior which is clearly not prevented by the law. > Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection. "The victims are tough enough to handle it" is a pretty poor justification for sleazy behavior.
  - icelancer 7y ago
    Shrug. Takes two to sign a lease. The commercial landlord knew what they were getting into.
    - kerkeslager 7y ago
      That's it, all unethical behavior is suddenly okay if it's legal, and caveat emptor? Contracts have very little meaning if one of the signatories can disappear without holding their end of the bargain and without consequences. Is this the society you want, one where giving someone your word is meaningless?
- ThrustVectoring 7y ago
  >"Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings." "Each lease is owned by a different subsidiary" doesn't help you that much against the lessors, they'll either charge you more or demand signed guarantees from the parent corporation. Counter-parties are not idiots, generally speaking. There's no free lunch here. How the structure helps is by protecting against other creditors that may arise out of operating the physical business in a way that may inadvertently generate legal liability. Since this is a real estate business, I'll go with a classic example - there's a spill on the floor, someone slips and falls and sues the people running the building. This litigant can generally only collect from any insurance policy and the subsidiary running the building - in order to go after WeWork's assets, they'd have to convince a court to pierce the corporate veil, and that's significantly more difficult.
  - kelnos 7y ago
    In this case, the lessors have gotten some good things out of the deal: if We walks away from the leases, the owners of the buildings get to keep all the improvements We has made.

I'm interested about the buildings. A lot of people bullish on WeWork say -- "Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings." Adam got a $750M loan from WeWork, right? I'm assuming he used that loan to secure more loans to buy the buildings he then rents back to WeWork (at a profit). I wonder what happens to him if WeWork walks away from his buildings. I doubt he has the cash to hold onto those buildings for more than a few months without a client -- especially if WeWork is still private. If they go public before they "walk away" from his buildings, he'll have to sell massive amounts of stock to cover his losses. Unless we get to negative interest rates, I don't see a future that looks good for WeWork.

somebodythere 7y ago
How do the negative rates benefit WeWork?
- WJW 7y ago
  Because they are net borrowers and lower interest rates mean they have to pay less interest.
kerkeslager 7y ago
> "Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings." Ugh. What an awful culture we live in where this is considered perfectly normal behavior.
- woah 7y ago
  Limited liability is a great concept which allows businesses to be run by people who don’t have the personal capital to absorb all possible losses of the business. Our society would be more unequal without limited liability. There are also many legal safeguards in place to prevent it being used for fraud, negligence, etc. Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
  - kerkeslager 7y ago
    > There are also many legal safeguards in place to prevent it being used for fraud, negligence, etc. You're doing a thing which is quite frequent on HN, which is where you say that unethical behaviors are prevented because some narrow definition of those unethical behaviors is illegal. But the bit I quoted above is an unethical behavior which is clearly not prevented by the law. > Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection. "The victims are tough enough to handle it" is a pretty poor justification for sleazy behavior.
- icelancer 7y ago
  Shrug. Takes two to sign a lease. The commercial landlord knew what they were getting into.
  - kerkeslager 7y ago
    That's it, all unethical behavior is suddenly okay if it's legal, and caveat emptor? Contracts have very little meaning if one of the signatories can disappear without holding their end of the bargain and without consequences. Is this the society you want, one where giving someone your word is meaningless?
ThrustVectoring 7y ago
>"Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings." "Each lease is owned by a different subsidiary" doesn't help you that much against the lessors, they'll either charge you more or demand signed guarantees from the parent corporation. Counter-parties are not idiots, generally speaking. There's no free lunch here. How the structure helps is by protecting against other creditors that may arise out of operating the physical business in a way that may inadvertently generate legal liability. Since this is a real estate business, I'll go with a classic example - there's a spill on the floor, someone slips and falls and sues the people running the building. This litigant can generally only collect from any insurance policy and the subsidiary running the building - in order to go after WeWork's assets, they'd have to convince a court to pierce the corporate veil, and that's significantly more difficult.
- kelnos 7y ago
  In this case, the lessors have gotten some good things out of the deal: if We walks away from the leases, the owners of the buildings get to keep all the improvements We has made.