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0 pointsivalm6y ago0 comments

Big Edit: multiplying is hard, forgot to multiply by the PE ratio! Actually, potential valuation is 660B.. so 20% would mean 3% of US office real estate business. At a less generous pe of ~10 (perhaps more appropriate given they don't own the buildings), it would be about 10% of real estate market.

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Sure, but $20B valuation seems hard to achieve.

US commercial real estate market by revenue is ~$1.1T [0]

Office space by value is about 1/8th [1]

Regus gross margin is ~16% [2]

Real estate generally has good PE ratio but partly because they usually own the property [3], so let's be generous at 30x.

So if we value WeWorks as a normal real estate company AND weworks has %100 of US office real estate business we have a valuation of 1100 / 8 x 0.16 x 30 = $660B.

Now, weworks exists outside of the US, but the valuation you propose means they must have ~equivalent of all US office real estate.

[0]- https://www.ibisworld.com/industry-statistics/market-size/co...

[1] - https://www.reit.com/sites/default/files/chartjuly92019.png

[2] - http://www.annualreports.com/HostedData/AnnualReports/PDF/LS...

[3] - https://www.investopedia.com/ask/answers/052815/what-priceto...

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5 comments · 4 top-level

hilbertseries6y ago· 1 in thread

Don’t you need to multiply that 22B by 30, or did you get all of those references but you don’t understand the difference between profit and valuation...

ivalmOP6y ago

you're right, apparently multiplying is hard! I first decided to make my back of napkin calculation (forgot to include the PE ratio) then wrote the post. I've amended it now.

kss2386y ago

What about the 30x earnings multiple? Shouldn't it be $22B*30?

So WeWork "only" needs to capture ~3% of the US market to be worth $20B

TuringNYC6y ago

>> US commercial real estate market by revenue is ~$1.1T [0] >> Office space by value is about 1/8th [1]

I'm a big fan of the WeWork concept, not commenting on specifics of how the business was run.

The way things worked in the past was just silly -- you signed a multi-year lease with no elasticity. I paid WeWork for personal space before and now my employer pays. It is expensive, but only on a unit basis. The model totally makes sense to me as a purchaser.

I guess the WeWork risk is the buy-long sell-short model which is always risky unless you are earning sufficient spread.

nihonde6y ago

I think it’s a given that Softbank’s involvement means the target market is global, with expansion in EMEA through acquisitions or mergers with other portfolio companies.

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