Why WeWork launched the ARK real estate acquisition platform

WeWork's parent company, The We Company, today announced a new real estate acquisition and asset management platform called ARK. The Canadian real estate investor Ivanhoé Cambridge, a subsidiary of the institutional investor Caisse de depot and placement du Québec, has agreed to invest $ 1 billion in the $ 2.9 billion fund that will be used for equity participation in buildings.

The announcement is remarkable because, to date, WeWork has taken a low-asset approach of storing leases, but not properties. This is changing as society becomes more competitive with the owners on whom it once relied as partners.

One part of WeWork's story is that its collaborative workspaces create value for the buildings in which they are housed. Quick business nicknamed this "WeWork" effect in 2015. We found that the properties containing WeWorks grew rapidly. For example, WeWork's Taylor Street building in San Francisco was worth $ 18 million in 2012. One year later, WeWork moved there. In 2015, the property was worth about $ 27 million.

A more recent example is a historic building in downtown Miami, where WeWork has been renting for three years. The building, 117 Northeast First Avenue, was purchased for $ 25.5 million in 2015 and is expected to be sold for $ 65.5 million in March. WeWork has another 12 years lease.

If this is true, it is not surprising that the company wants to capitalize on the value it brings to homeowners.

WeWork already has interests in several properties through its real estate agency, WeWork Property Advisors. Earlier this year, the The Wall Street Journal revealed that General Manager Adam Neumann personally purchased properties and returned them to WeWork, creating a potential conflict of interests that made investors nervous. Neumann said that he would sell these properties to ARK. Properties owned by WeWork Property Advisors will also be transferred to ARK.

If Neumann bought these buildings, it's partly to prove the value of WeWork. "If I do not put my own money on it, why would other real estate owners have the guts to buy it?" He said. Bloomberg, who first reported the news. As the article points out, part of this is convincing homeowners that it pays to pay 90% of the cost of converting their space into WeWork.

And that can become more difficult. Owners have been sensitized to the WeWork game and, in some cases, are developing their own technology, developing their own flexible spaces and associating with less complex co-working startups to provide the type of services desired by tenants. As WeWork becomes more of a competitor to homeowners, it may find itself less able to access certain real estate or favorable transaction conditions.

The ultimate platform

The company We and smart homeowners are increasingly aware that real estate is only a platform, a blank slate that needs to be programmed. For ever, homeowners hire tenants based on whoever is willing to pay the most. But the priorities have changed. People want to live and work in places with all their favorite things. Buildings are now a question of personality: is there a green salad box or a salad box? An equinox or a crunch? A Starbucks or a blue bottle? The value a commercial tenant brings to a space is now as important as the price they are willing to pay.

Related Companies, the real estate company behind New York's newest neighborhood, Hudson Yards, presents some of the cleverest executions of this idea. The company not only thinks about how it manages spaces with a combination of retailers and service providers, it also knows how to buy companies that fit its vision, like the fitness brand Equinox, which owns the cycling group SoulCycle worship.

We is also multitasked. It now has its own fitness brand (Rise), a residential society (WeLive), an alternative school for designers and engineers (Flatiron), and even a school-school for children aged 2 to 11 (WeGrow). -Work (WeWork). She also researches and designs offices for large companies such as Microsoft or Pinterest, customers who can be programmed into her portfolio of buildings, which also contributes to the rise of this activity.

WeWork invests heavily in building technology and talent teams that will enable it to develop what it believes to be its most valuable asset: its community. If WeWork becomes a homeowner, it has a much greater opportunity to prove that it is good to build places that people want to be and buildings that will sell very dearly in years.