What Would I Do If I Were the New CEO at WeWork?
By: Jeff Reinstein, CEO at Premier Workspaces
In 2002, I started running Premier Workspaces (formally Premier Business Centers), one of the largest shared workspace/coworking companies in the United States with 91 locations nationally. Premier started by acquiring American Office Centers, which had 9 locations and filed bankruptcy in 2001. In total, we have taken over and repositioned 74 shared workspace centers, most of which were distressed. There has been no other company in the coworking space that I am aware of that has acquired and repositioned more failed or distressed centers than Premier Workspaces. Premier has also never defaulted on a lease obligation in its 17-year history.
Just two years ago we took over seven co-working locations from a company called Real Office Centers (ROC) that ran into financial trouble. ROC had a similar business model and look as WeWork. We had to move very quickly to retain the employees and clients as well as getting control of the telephone and internet systems. We were able to take over all seven locations on very short notice (in one case only three hours) and stabilize them. We went back to more than 800 clients and asked them to re-sign new membership agreements, since the ROC agreements were no longer valid. After we stabilized those locations, we began the process of repositioning them, so that we could sign long term market leases and make a profit (unlike the prior operator).
Although SoftBank may infuse more money to keep WeWork going, based on the press reports that I have read WeWork is quickly running out of cash and has many projects still in development. If I were the new CEO of WeWork, here are the steps I would take:
1. Stop all projects in development where construction hasn’t started, even if it meant walking away from a letter of credit, deposits, or other costs.
2. Lay off all acquisition/new business employees.
3. Sell or shut down all non-coworking business.
4. Cancel any private plane costs or other extravagant company expenses and sell the plane.
5. Renegotiate all of their master leases where they are losing money. In some cases that might mean reducing the size of some of the locations or closing them and relocating the customers to another property.
6. Increase membership fees, since they are too low for the premium product that WeWork builds.
7. Reduce the staff to roughly 2,500 employees. WeWork probably doesn’t need more than 3 employees per center (which totals 1,500 employees) and no more than 1,000 corporate employees including area managers.
8. Finally, if I was the new CEO of WeWork and I couldn’t get enough landlords to work with me on restructuring the leases, I would have no other option, but to put the company into bankruptcy in order to force the landlords to renegotiate.
With these changes, WeWork will probably emerge a much smaller, leaner company and would be cash flow positive.
I am not aware of any other company in the shared workspace industry that has the experience Premier Workspaces does in dealing with these types of situations and repositioning centers, so I hope my insight is valuable.