WeWork raises $ 1 billion from Ivanhoe Cambridge, a Canadian company, for the acquisition and management of real estate

WeWork is expanding its property acquisition and management business, raising $ 1 billion from Ivanhoe Cambridge, a Canadian company, to purchase real estate in major cities around the world.

Ark, the new commercial real estate unit of the US company, will rely on Ivanhoe 's US $ 1 billion investment and about US $ 1.9 billion worth of investment. other investors to buy and develop commercial properties in major urban centers such as Toronto, London and Paris. .

WeWork's decision to launch Ark marks a strategic turning point for the coworking company and its parent company The We Company. Until now, The We Company has been largely focused on the subletting of office space rather than on the ownership of commercial properties. But the nine-year-old company is losing money as it adds new office-sharing locations in more than 27 countries, including Canada, highlighting the need for new sources of revenue.

The adoption of We in the acquisition and management of buildings is at a pivotal moment. WeWork's parent company is considering an initial public offering to fund future growth despite the poor performance of recent IPOs by startups Uber Technologies Inc. and Lyft Inc.

"We think the opportunity is great," said Richard Gomel, Ark's Managing Partner.

For Ivanhoé, the real estate company owned by the Caisse de dépôt et placement du Québec, the investment in Ark represents a big bet on the shared office space and the brand The We Company. Ivanhoé was the first landlord in Canada to open a WeWork site here.

The Quebec company, which manages more than $ 65 billion in real estate assets in America, the United Kingdom, Australia and China, also rents office space to other office sharing operators such as Breather , Spaces and Convene.

"We do not think it's a passing trend. We believe that the collaborative space is growing, "said Sylvain Fortier, Director of Investments and Innovation at Ivanhoé. "We must be humble and recognize that this is not our expertise," he said.

Under the terms of the investment, Ivanhoé will work with Ark to purchase properties that will be transformed into WeWorks and other related activities, such as short-term residential spaces called WeLive. "Very rarely, a tenant and his landlord buy together," said Fortier.

Ivanhoé said his investment in Ark could be flexible, ranging from office towers to apartments, to a portfolio of real estate. Ark said that she could buy properties that WeWork is already renting.

When asked if Ivanhoé would give Ark a new injection of funds, Mr Fortier said it was too early to say. "I would like to be able to follow with more capital later, but it's so much money that I must also consider portfolio allocation and diversification," he said.

Ark builds on The We Company's relationship with private equity firm Rhone Group, which provided WeWork with significant capital for the acquisition of the largest Lord & Taylor department store building in Manhattan.

Mr. Gomel said that having $ 2.9 billion in equity capital for the purchase of properties would help other parts of The We Company's business grow.

"We did not have any problem of request, we had a problem of supply, we had access to a physical space. [Buying properties] it would help, "he said.

Currently, approximately 25 employees are dedicated to Ark, including a former general manager of a real estate investment trust in New York, Wendy Silverstein. Mr. Gomel, also a former executive of Starwood Capital Group real estate investment company, will report directly to WeWork founder Adam Neumann.

The new asset management unit was called Ark because it invoked "the idea of ​​a powerful vessel that can withstand all storms," ​​says Gomel. This will be the fourth pillar of The We Company, which grew out of its core business, WeWork, and also includes WeLive and early childhood education, called WeGrow.

We has grown rapidly, mainly through WeWork. There are now more than 400 WeWork sites in 27 countries. It is one of the largest tenants in New York and London.

Its business model is based on rent arbitrage, where WeWork signs long-term leases and sublets the same space at a favorable price, usually for a period of time, to technology startups and other contractors. .

However, the company has not yet made a profit and analysts have questioned its valuation of $ 47 billion. It is unclear whether Ark will help improve overall profitability.