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Report: WeWork has a new CEO and he’s a real estate — not a tech — exec

If WeWork wanted to cement the impression that it no longer strives to be viewed as a tech company but rather as a real estate giant focused on leasing space, it would probably choose a veteran from the real estate world.

That’s just what it has done, too, according to a new story from the WSJ that say the company, which was famously forced to pull its initial public offering last fall, has settled on Sandeep Mathrani as its new top banana.

Mathrani, has spent the last 1.5 years as the CEO of Brookfield Properties’ retail group and as a vice chairman of Brookfield Properties. Before joining the Chicago-based company, he spent eight years as the CEO of General Growth Properties. It was one of the largest mall operators in the U.S. until Brookfield acquired it for $9.25 billion in cash in 2018.

Mathrani also spent eight years as an executive vice president with Vornado Realty Trust, a publicly traded real estate company with a market cap of $12.5 billion. (Brookfield is slightly smaller, with a market cap of roughly $8 billion.)

Mathrani will reportedly relocate to New York from Miami, where according to public records, he owns at least one high-rise apartment that he acquired last year.

He’ll be reporting to Marcelo Claure, the SoftBank operating chief who was appointed executive chairman of WeWork in October in order to help salvage what Claure has himself said is at least an $18.5 billion bet on WeWork at this point by SoftBank.

Specifically, Claure told nervous employees at an all-hands meeting shortly after his appointment, “The size of the commitment that SoftBank has made to this company in the past and now is $18.5 billion. To put the things in context, that is bigger than the GDP of my country where I came from [Bolivia]. That’s a country where there’s 11 million people.”

Claure — who earlier spent four years as the CEO of SoftBank-backed Sprint —  was reportedly trying to hire T-Mobile CEO John Legere for the CEO’s post. Legere later communicated through sources that he had no plans to leave T-Mobile, yet just days later, in mid-November, Legere, who joined T-Mobile in 2012, announced that he’s stepping down as CEO after all, though he will remain chairman of the company. (According to the Verge, his contract is up April 30.)

Sprint and T-Mobile were expected to merge, though 13 states, led by the attorneys general of New York and California, are suing to block the deal.

Either way, Mathrani is a stark contrast to WeWork’s cofounder and longtime CEO Adam Neumann, who was pressure to resign from the company after his sweeping vision for it as a tech company that would enable customers to seamlessly shift from one WeWork location to another — paying for ever increasing software and services as monthly or yearly subscribers — was met with extreme skepticism by public market investors.

Indeed, though SoftBank marked up the company’s value over a number of private funding rounds to a brow-raising $47 billion, public investors began raising questions about its real value — and WeWork’s governance — as soon as WeWork publicly released the paperwork for its initial public offering.

Between the in-depth look its S-1 provided into the company’s spiraling losses, the degree of control held by Neumann (not fully understood previously), and a series of unflattering reports about his leadership style, including beginning with the WSJ, it didn’t take long before the company was forced to abandon its IPO dreams.

No doubt it’s now Mathrani’s job to eventually resuscitate those.

According to the WSJ, SoftBank has already established a five-year business plan that it expects will get the company to profitability and allow it to be cash-flow positive by some time next year. Part of that plan clearly involved layoffs; it cut 2,400 employees in late November, shortly before the Thanksgiving holiday in the U.S. It has also been selling off companies that were acquired at Neumann’s direction but are seen as non-core assets. What WeWork does not intend to curtail, reportedly, are its efforts to open new locations, even if it acquires them at a slower pace than in previous years.

Report: WeWork cofounder Adam Neumann may have to unload property to pay off a giant loan

Adam Neumann may be out of the daily flow of WeWork, but he seemingly remains top of mind to some of the company’s bankers.

According to a new Business Insider piece, Neumann is working with JPMorgan, UBS, and Credit Suisse to consider new terms for a $500 million loan that he took out before WeWork filed to go public, and from which Neumann has already drawn down $380 million. Since he can no longer pay the loan with proceeds from selling WeWork shares publicly (it yanked its S-1 filing earlier this week), he may have to put up some of his properties or other assets as collateral for the loan, according to one of BI’s sources.

“No terms have been set,” a spokeswoman for Neumann tells the outlet.

Per earlier reports, Neumann has plenty to offload if it comes to it, having acquired numerous residential and commercial properties over the years.

Among his reported investments is a $10.5 million Greenwich Village townhouse; a farm in Westchester, New York; a home in the Hamptons where he reportedly weathered the storm with his family ahead of resigning as CEO last week; and a $21 million, 13,000-square-foot house in the Bay Area with a guitar-shaped room.

According to an earlier WSJ report, Neumann has also bought several commercial properties through investor groups that he had leased back, in some cases, to WeWork.

WeWork, and Neumann, have both enjoyed a close relationship with JPMorgan in recent years. As recently reported in the NYTimes,  JPMorgan “lent Mr. Neumann money personally (with his inflated shares as collateral), provided equity and debt for the company, served as a corporate adviser for the I.P.O. and secured nearly $6 billion in financing as part of the now scotched offering.”

WeWork China raises $500M to triple the number of cities it covers

WeWork’s China business is getting a fresh injection of capital after it raised $500 million.

The company entered China two years ago and today it covers Beijing, Shanghai and Chengdu with nearly 40 locations. It claims 20,000 members, and it is also active in Hong Kong, which technically falls under ‘Greater China.’

The new capital comes from Trustbridge Partners, Singapore’s Temasek, SoftBank, SoftBank’s Vision Fund and Hony Capital. WeWork said it’ll be used for expansion into six new cities: those are Shenzhen, Suzhou, Hangzhou, Chengdu, Nanjing, and Wuhan. This new raise is a Series B, WeWork China previously scored a $500 million Series A last year, which was also when the Chinese entity was founded.

The company has been pretty busy over that 12-month period, most notably it scooped up its largest rival, Naked Hub, in an acquisition deal that is worth a reported $400 million and massively grew its reach.

Naked Hub builds on WeWork’s presence in Greater China by adding 24 office locations and a further 10,000 members. That’s why WeWork China’s figures are so impressive for just two years of operations. Now, this new capital will put WeWork’s own DNA into that network through this planned expansion spree.

“This investment will help WeWork fuel our mission to support creators, small businesses, and large companies across China,” WeWork CEO and co-founder Adam Neumann said in a statement. “WeWork has built an incredible team in China that supports our members every day, serving as a bridge for local companies who want to reach the world as well as for global companies that want to enter the Chinese market.”

Outside of China, WeWork is also making inroads in India — where it launched in 2017 — Korea, Japan (where it operates a joint venture with SoftBank) and Southeast Asia, where it made an acquisition to kick-start its presence. Indeed, WeWork has a float of around $500 million for its operations in Southeast Asia and Korea, although the total pot for India is unknown at this point.

WeWork China’s big raise comes days after Hong Kong’s Campfire pulled in $18 million and Awfis in India raised $20 million.

WeWork confirms deal to buy Naked Hub, one of its main competitors in China

WeWork is buying up one of its largest competitors in China after it announced a deal to acquire Naked Hub.

The deal was widely reported by Chinese media yesterday, but WeWork has now confirmed it through a blog post from its CEO Adam Neumann. Terms of the transaction are not disclosed but Bloomberg reported that it is worth around $400 million.

Naked Hub is an offshoot of China-based luxury resort company Naked Group that was started in 2015 by Grant Horsfield and Delphine Yip-Horsfield. The company is primarily anchored in China, with most of its locations in Beijing and Shanghai, but it has expanded into Australia, Hong Kong and Vietnam. All told, it claims to have 10,000 members across its 24 office locations.

Even though a deal to merge with Singapore-based JustCo was called off, Naked Hub had emerged as one of WeWork’s fiercest competitors in China with the ambition to continue that battle in Southeast Asia and other markets, as I wrote last year.

WeWork isn’t commenting at this point about how it plans to integrate the two brands, but its CEO Neumann paid tribute to the Naked Hub business.

“We have found an equal who shares our thinking about the importance of space, community, design, culture, and technology. Together, I believe we will have a profound impact in helping businesses across China grow, scale, and succeed,” he wrote.

“China-born naked Hub and WeWork may come from vastly different backgrounds, but there is more that binds us than separates us. The values we share toward creating a vibrant community for our members by using design, technology, and hospitality are core to how both companies are successful,” said Horsfield, Naked Group’s founder and chairman.

Naked Hub may be a growing threat to WeWork China, but it is far from the only major competitor. Unicorn Ucommune — which changed its name from URwork following a lawsuit from WeWork — is perhaps the largest profile Chinese challenger.

WeWork launched in China in 2016 via Shanghai. Today it said it has 13 locations in Greater China with plans to increase that to more than 40 by the end of this year. That’s a move that it said will quadruple its membership numbers in China from 10,000 to 40,000.

The deal is WeWork’s second acquisition of a competitor in Asia, its first being a deal to buy SpaceMob, a then 1.5-year-old company in Singapore, last year.

The company has been lining its pockets to fuel a big push into Asia.

Last year, the firm span out a WeWork China entity backed by $500 million from investors, while capital also went to WeWork Japan — a unit that investor SoftBank owns half of — and WeWork Pacific, its business focused on Southeast Asia and other parts of the region which also got a $500 million to spend. All of that capital was part of a $4.4 billion investment round in WeWork from SoftBank.