Cost Of Backing WeWork's IPO Is Adding Up For Big Real Estate Firms
Some of the biggest names in real estate investment and brokerage are facing up to losses following WeWork’s announcement last week that it may not be able to continue as a going concern.
Starwood Capital and Cushman & Wakefield were among the firms that invested hundreds of millions of dollars in WeWork when the company went public in September 2021. The company listed at $10 a share, giving it a value of about $8B.
But as of Friday, WeWork was trading for just 13 cents a share, and its market capitalisation was $275M. The company said it would undertake a reverse stock split, swapping every 40 existing shares for one new share, to comply with New York Stock Exchange rules for remaining a listed company.
Cushman & Wakefield, the world’s third-largest commercial real estate broker, invested $150M in WeWork when it went public via a merger with a special-purpose acquisition company run by Sacramento Kings owner Vivek Ranadivé.
Cushman & Wakefield struck an agreement in which WeWork would provide space and property services for its corporate clients, and C&W would become WeWork’s facilities manager in some parts of the world — in addition to buying shares in the newly public company via a mechanism called an equity backstop.
As of last week, the value of that stake had dropped by almost 99%.
"WeWork has been a valued partner to Cushman & Wakefield as we engage with existing and potential clients to craft their unique real estate strategies and needs, which may include the option of flexible office space,” a company spokesperson told Bisnow in an emailed statement.
“From an accounting perspective, we value our stake in WeWork consistent with the movement in the WeWork public share price and as of our most recent quarterly public filing, our stake in WeWork was valued at $3.8M.”
Another significant investor in WeWork’s IPO was Starwood Capital. Funds managed by the company anchored an investment process that ultimately saw $800M raised from new investors to buy WeWork shares in 2021.
The size of Starwood’s own investment in WeWork was never disclosed, but a document WeWork filed with the Securities and Exchange Commission in March this year gives some insight.
That document lists more than 100 WeWork shareholders, including Starwood’s 10th and 11th opportunity funds. Those two funds own a combined 12.5 million shares in WeWork, or about 2%.
If they were bought as part of WeWork’s 2021 IPO at $10 a share, that would put Starwood’s investment at around $125M. That stake would now be valued at $1.6M at a price of 13 cents a share.
Starwood declined to comment on its investment in WeWork.
Other real estate firms on the March list of WeWork shareholders include War Horse, the Baltimore-based development firm run by Scott Plank, the brother of Under Armour founder Kevin Plank and one of Under Armour’s early investors and executives. The company owned 800,000 shares in WeWork as of March.
“WeWork has made an important impact on work globally. I’m proud to have been a strong very early supporter,” Plank told Bisnow in an email.
Cohen & Steers, the specialist listed real estate investor, owned just shy of 8 million shares in WeWork as of this spring. Chinese investor Oceanwide Holdings owned just over a million.
Former basketball star Shaquille O’Neal owned 12,000 shares, and WeWork founder Adam Neumann owned just short of 20 million.
The largest shareholder and biggest investor in WeWork is SoftBank, the Japanese tech investor. It owned more than 450 million WeWork shares as of March, just short of two-thirds of the company. At the time of the IPO in 2021, SoftBank said it had invested close to $17B in WeWork.
CORRECTION, AUG. 23, 10:15 A.M. ET: A previous version of this story misstated the name of Oceanwide Holdings. This story has been updated.
