[nebolo]

I think the model is rather: a) buy long-term leases at low price b) sell short-term leases at high price

The problem with this model is that when demand for real estate falls (e.g. because of economic cycles, trends/tastes, etc.) the revenues will evaporate and the costs will remain.

[JackFr]

It's like the old joke: If you can't pay back a $1 million loan, you have a problem. If you can't pay back your $1 billion loan, the bank has a problem.

If WeWork can't pay the lease on 29,000 square feet of office space, WeWork has a problem. If they can't pay the lease on 2.9 million square feet of office space, the owners have a problem.

[DesiLurker]

that is true only when WeWork may be in danger of filing bankruptcy, otherwise contract law prevails.

[CPLX]

My understanding is that they spin up separate entities to sign leases, and have cancellation clauses. It seems nuts landlords would agree to that but it’s come up a few times in prior threads.

[DavidHm]

There's a bit of longer-term reputation damage which is significant in an industry dominated by companies who tend to think over the span of decades rather than quarters.

One fairly big serviced offices company pulled the "separate entities" trick in one of the previous recessions, and some of the major landlords in that country still to this day, more than a decade later, refuse to do business with them.

[55555]

I think also more true when they rent from a single owner.

[BrandonM]

An HN submission 4 months ago¹ reported that WeWork forms a separate subsidiary for each lease agreement. So at least when they're not the owner, they've conveniently arranged to not be on the hook if a particular location or region doesn't work out.

¹ https://news.ycombinator.com/item?id=18714962

[mr_custard]

Also this: https://wolfstreet.com/2019/03/25/how-can-a-company-with-1-8...