WeWork’s investment in SE Asia, South Korea ops to hit $1b by 2020

Pedestrians pass outside a shared office space, operated by WeWork Cos Inc., in London, U.K., on Monday, Aug. 14, 2017. Photographer: Jason Alden/Bloomberg via Getty Images

New York-headquartered co-working space provider WeWork‘s investments in PacificCo, its Southeast Asia and South Korea-focused joint venture with SoftBank, will reach $1 billion by 2020, according to the company’s S-1 filing.

WeWork, owner of The We Company, first invested $500 million in PacificCo in 2017 and then injected $300 million more in 2018. Based on the terms of the agreement of the PacificCo transaction, WeWork is required to contribute an additional $100 million to the company in 2019 and 2020 each.

PacificCo is 60 per cent owned by WeWork and 40 per cent by SoftBank. The JV focuses on operating WeWork in select markets in Asia, excluding Greater China and Japan and including but not limited to Singapore, Korea, the Philippines, Malaysia, Thailand, Vietnam, and Indonesia.

WeWork also disclosed that SoftBank has committed to invest over $10 billion in the startup and its subsidiaries. “Since January 1, 2017, SoftBank Group Corp., SoftBank Vision Fund L.P. and/or their respective affiliates (collectively, the “SoftBank entities”) have invested or committed to invest in us and our subsidiaries approximately $10.65 billion,” it said.

In Asia, WeWork operates three joint ventures – PacificCo, ChinaCo, and JapanCo. The key investors in ChinaCo are SoftBank, Hony Capital, and Trustbridge, with WeWork owning 59 per cent of the entity.

Its 50:50 joint venture partner in JapanCo is SoftBank.

“These strategic relationships have allowed us to expand into new regions without putting our capital at risk. Our relationships with local partners have helped us establish a foothold in these key markets and laid the foundation for our future growth,” the company said.

WeWork added that it has negotiated the right to buy out its strategic partners in each of the regions after a set period of time.

The total revenue recognized by WeWork during the six months ended June 30, 2019, which is eliminated in consolidation, was $7.3 million, $4.6 million, and $4.3 million from ChinaCo, JapanCo, and PacificCo, respectively.

This compares to the total revenue recognized during the year ended December 31, 2018, which is eliminated in consolidation, which was $7.3 million, $2.0 million and $4.1 million from ChinaCo, JapanCo and PacificCo, respectively.

The table includes selected consolidated financial information of WeWork’s consolidated variable interest entities (VIEs) as of December 31, 2017 and 2018.

The joint ventures have been actively pursuing acquisitions since 2018. In April last year, ChinaCo, PacificCo, and WeWork Australia acquired 100 per cent of the issued and outstanding stock of naked Hub Holdings Ltd, naked Hub Vietnam Holdings Limited, and naked Hub Australia Pty Ltd.

Naked Hub, founded in 2015, was formerly the co-working arm of Shanghai-based luxury resort company Naked Retreats. As of the acquisition date, Naked Hub had approximately 8,000 members across 25 locations, primarily in Shanghai, Beijing, Australia, Hong Kong, and Vietnam.

The total consideration for the acquisition of Naked Hub was $480.3 million, in the form of cash, Class A Ordinary Shares of ChinaCo, and Class A Common Stock of the company.

PacificCo acquired 100 per cent of the equity of Naked Hub Vietnam for $14.4 million and WeWork Australia acquired 100 per cent of the equity of Naked Hub Australia for $16.2 million, both all cash transactions. ChinaCo acquired 100 per cent of the equity of Naked Hub Holdings for a total consideration of $449.7 million

We Company, co-founded in 2010 by its chief executive, Adam Neumann, said in a filing with the U.S. Securities and Exchange Commission that it lost more than $900 million in the first half of 2019, up 25% from a year earlier, even as its revenue doubled to $1.54 billion.

The company is considering looking to raise $3 billion to $4 billion in the IPO and could launch its IPO investor roadshow the week after the U.S. Labor Day public holiday on Sept. 2, according to a Reuters report.