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Comment by Bluecobra | Hacker News Reader

They are going to be screwed when there’s another recession, given that they don’t actually own the office space they rent out. This is a real gem:

“Substantially all of our leases with our landlords are for terms that are significantly longer than the terms of our membership agreements with our members. The average length of the initial term of our U.S. leases is approximately 15 years, and our future undiscounted minimum lease cost payment obligations under signed operating and finance leases was $47.2 billion as of June 30, 2019.”

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I would say those landlords are going to be in for an even bigger shock.

Apparently the CEO owns a bunch of the places and leases them to the company.

And he bought those with money he pulled out of the company.

> I would say those landlords are going to be in for an even bigger shock.

Not at all. We is a player in major markets that are populated by professional landlords that have been in this business for much longer than the founder of WeWorks has been alive and have seen it all before, dressed in different clothes. At the end of the day, the class A/B/C buildings as well as the lots they sit on and the air rights above them are real appreciating assets, while the tenants are just the revenue stream for opex.

If WeWork goes broke it's mildly annoying to have to find other tenants, it's true. But it's not like they can't plan for that.

For instance if WeWork goes down, there are still tenants that might want to stay in the building. That's a sensible place to start.

The tenants who want to stay in the building aren't going to be paying the same private equity subsidized prices that WeWork were. I'd imagine in some markets wework is such a big customer now that their collapse would cause massive repercussions.

In a default scenario, the temptation for the building owners and ultimate tenants to cut bilateral deals and screw over the middle man (WeWork) would be huge. For the owner it's win-win - they keep cashflow coming in and if the deal remains short term then they can replace the tenant with someone who will sign a longer-term lease once markets recover fairly easily.

I know one landlord who rented several buildings to them and he understands the risks perfectly, but says the price per sq/ft he's getting paid is so good that even if they blow up within 3 years it's still a great deal.

Curious to know what the landlords think of Wework’s prospects. Does he think they are going to blow up soon?

Honestly I don’t think he cares/understands that much, but he’s pretty excited about the coworking trend in general and thinks it’s not going away.

I thought this as well.

Alternatively though, WeWork is an easy way for companies to reduce their expenses during a recession.

And more layoffs mean more people trying to be freelancers, and doing things on their own, which creates a greater need for coworking spaces.

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