WeWork, the $10 billion startup that rents space to other startups, wants to rent you a place to live, too
That same investor presentation from The Information says it hopes to find success for its co-living endeavors by developing partnerships with developers and landlords.
Its five-year forecast predicts "WeLive will have 34,000 members in 2018, living in 69 WeLive locations, with per-member revenues of $1,988 and $100 in services," according to The Information. "Overall by that point WeLive is projected to generate $636 million in revenue, or 22 percent of WeWork's total revenues, and $158 million in income before selling, general and administrative costs, taxes and depreciation."
This rosy picture is based on the assumption that WeWork will drastically increase its membership and revenue per member, but the report exposes several financial details that could cause alarm for investors.
WeWork's near-term costs appear artificially low because of large initial concessions from landlords, The Information reports. WeWork is locking itself into longer lease deals than is usual in the industry, and getting benefits from doing so such as initial free rent.
An example The Information gives is that of a 20-year lease signed in New York's financial district, on which WeWork got over a year of free rent. This free rent, however, was not spread out over the length of the lease, as is usually standard accounting practice. Instead, it was plugged straight into the current numbers, increasing near-term profits.