Why does a company that is worth more that 20 billion dollars rent property in the first place? If, as others have said, the total value of the lease was $440 million, surely its better to hire people to buy and run an office building?
By the way, it’s not just SF, it’s also the big chunks of the valley. The Facebook sign still says Sun on the back, and the Googleplex land is on lease from NASA. Question I’d like to know the answer to: who owns the land at Apple Park?
This law is enshrined in that fine document the California constitution, and can only be repealed by a simple majority of voters. Voters who own homes, or live for free in a home someone owns, or pay rent to live in a home someone owns.
"Zynga to Make $369 Million on Sale of Headquarters. That's far more than the company has ever made selling mobile games."
https://www.fool.com/investing/2019/05/29/zynga-to-make-369-...
Owning and managing physical property isn't what a tech company is good at. Some of the really big companies might own some of their buildings completely... but I feel confident in saying that most don't.
Owning and managing a physical property means also having staff that does maintenance, grounds keeping, electrical, plumbing, deals with the accounting on taxes, etc... That isn't party of the core competency of the tech company. If anything, it distracts the company from its revenue.
A company that I worked at in the late '90s and '00s in Sunnyvale bought the land, built the buildings... and then immediately turned around and sold them to a property management company and leased it back from them.
Market cap often isn't a good metric for how large a company is operationally, nor a great indicator of its operational needs. This is especially true right now, given that valuations are often quite inflated.
Pinterest is worth $21 billion, however they only have 2,400 employees.
Shopify is worth $124 billion. They have ~5,000 employees.
Target is worth $75 billion and has 368,000 employees.
3M is worth $94 billion and has 96,000 employees.
IBM is worth $111 billion and has 356,000 employees.
GE is worth $57 billion with 205,000 employees.
And so on.
Then there is Visa, worth $473b, more than the valuation of all the publicly traded banks in the EU. Only 19,500 employees and comical margins (67% operating income margin, extreme to say the least). Versus, say, Wells Fargo with a $101b market cap and 265,000 employees. Obviously very different businesses within the financial world, however that's the point.
Or AMD, worth $100b, with close to 20,000 employees. Intel has 110,000 employees with a $214b market cap. Intel's operating business is ten times larger than AMD (one assumes AMD will enjoy increasing economies of scale from their products as they continue to grow). The market cap just typically doesn't tell you enough about the operations of a business to give you great insight into its office needs.
Also there might be some tax incentive if you can put the building down as an ongoing cost to your company.
Office buildings are funded with mountains of cheap debt.
Pinterest is funded mostly with equity. Maybe debt later when the growth is more stable but mostly equity.
Financially, equity is jet fuel. It's expensive and you use it to build startups, movies, and other intangible-heavy things.
Real estate debt is more like gasoline or diesel. There's a lot more of it than jet fuel, it's cheaper, and lower-quality/energy.
If you try to run a gasoline engine (office space) on jet fuel, you'd likely destroy it and would definitely waste money putting something of too high a "grade" into the engine. Likewise, you can't run a jet engine (startup) on diesel. It won't run.
Getting back to the question at hand, it's more efficient to run the offices on cheap real estate funding, and have the Pinterest operating company lease the asset, than have it own the office directly. Sometimes companies will buy offices themselves (like Apple) but it's something investors put up with, not encourage.