Inside WeWork's sprawling empire, which includes a $24 billion rent bill

The co-working company, which is seeking $US500 million ($660 million) to finance yet more growth, has amassed a global portfolio of more than 1.3 million square metres, approaching the size of the entire office and retail space in London’s Canary Wharf district, according to bond documents reviewed by Bloomberg.

In all, the New York company has committed to pay at least $US18 billion in rent for that space, the documents show. WeWork declined to comment.

These are the highlights:

Membership

WeWork boasted 220,000 members as of March 1, up from 7000 four years ago. Those members have access to 251,000 desks in 234 locations spanning almost two dozen countries. While the company is best known for luring tech startup freelancers, the bond documents reveal an increasingly diverse customer base.

Revenue

The massive jump in locations and memberships has driven revenue growth in excess of 100 per cent. But costs are rising faster, resulting in a total net loss of $US934 million last year. The company’s growing use of discounts to attract new members has also pushed down the revenue it generates from each of them by 6.2 per cent to $US6928, the documents show.

Ownership

WeWork’s general and administrative costs rose almost threefold in 2017, mostly because it bought back stock from employees in October, according to the document. Last summer, WeWork had raised $US4.4 billion from SoftBank Group, some of which had been used to buy shares from employees and early investors.

WeWork chief executive officer Adam Neumann holds more than 75 per cent of outstanding shares of Class B common stock, the document said. They give him more than 65 per cent of the voting power, the ability to dictate who sits on the board and control of key decisions such as acquisitions.

Occupancy

A drive to lure more blue-chip companies into short-term spaces has helped boost WeWork’s occupancy levels. The company said it needs at least 60 per cent occupancy to cover each location’s costs. Last year, it managed to fill 81 per cent of desks, up 5 percentage points from a year earlier. WeWork now boasts members from about 22 per cent of the Fortune 500, including HSBC, General Motors and Microsoft, the documents show.

Buying long and selling short

WeWork’s rapid expansion has resulted in an eye-watering rent bill that it’s now seeking to manage by diversifying into owning or managing buildings instead of just renting them. The company has committed to pay at least $US5 billion in rent by 2022, with a further $13.2 billion due from 2023 onwards. Investors can also take comfort from the fact that each of WeWork’s locations is housed within a separate subsidiary and isn’t directly leased by the parent company. While landlords are given guarantees or credit letters from the parent, these usually last for just six to 12 months on an average 15-year lease, according to the bond documents. That should give WeWork more flexibility to close locations if times get tough, mitigating the risk of signing long-term leases while renting space to members on short-term contracts.

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