The We Company? More like the We-don’t-know-when-we’re-going-to-be-profitable Company. Of course, that name is a lot less ticker friendly.
The story of the We Company, WeWork’s parent company, continues to be big-time revenue — and also big-time losses. In a filing made public on Wednesday, the company revealed that it generated $1.54 billion in revenue but lost a net of $689.7 million in the first six months of 2019. Yikes.
The financial information was included in the We Company’s prospectus for its initial public offering, which could happen as soon as next month. The prospectus further fueled questions on Wednesday about the We Company’s ability to survive an economic downturn and whether its IPO will go the way of other unicorns like Uber and Lyft (which is to say, not well).
The prospectus also underscored ongoing potential conflicts of interest. CEO Adam Neumann still owns four buildings that are leased to WeWork. ARK Capital Advisors, which is WeWork’s real estate investment vehicle, has entered a “management agreement” with Neumann, despite the fact that Neumann announced that he would sell the properties to ARK. Another red flag in the disclosure, David Jeans and Elizabeth Kiefer report, was the fact that WeWork and its lenders have also provided nearly $1 billion (!) in personal loans and credit to Neumann.
The Trump administration delayed the application of certain tariffs until December. But some construction firms are already feeling the heat.
Back in May, President Trump ordered an increase in tariffs from 10 percent to 25 percent on $200 billion in Chinese imports. China retaliated with an increase on $60 billion in U.S. goods. According to the National Association of Home Builders, building materials including steel, bricks and aluminum were impacted.
On Tuesday, the president delayed tariffs on certain goods until December and also eliminated some others. Still, some construction contractors have already seen costs rise and feel that the tariffs have increased uncertainty in the industry, Sylvia Varnham O’Regan reports.
“The bulk of steel imports here in the States come from Asia — China being the primary marketplace — and the tariffs we’re seeing have had a gross impact on the overall cost of the trades with which we deal with steel,” said Anthony Rinaldi, who heads New Jersey-based the Rinaldi Group. “We’ve been seeing an increase of about 5 percent on the overall gross value of their numbers. That we’ve been seeing climbing over the last nine-to-12 months.”
The tariffs are just one drop in a larger black cloud looming over the global economy. The Dow Jones industrial average fell around 800 points, or 3 percent, on Wednesday. According to the Washington Post, the drop was in response to what traditionally is a warning sign of recession. For the first time since the big one — the 2008 financial crisis, that is — the returns on short-term U.S. bonds outpaced those of long-term bonds. This scary phenomenon is called a “yield curve inversion” and it potentially reflects a lack of confidence in the economy. Earlier this year Duke University finance professor Campbell Harvey said yield curve is “the last of four horsemen of the recession to rear its head.”
What we’re thinking about next: Seems like the signs are there, but is a recession on the way? How are you preparing? Send your tips and best predictions/tea leaf readings to [email protected].
Residential: The priciest residential sale recorded on Wednesday was for a condo unit at 145 President Street in Carroll Gardens, at $4.1 million.
Commercial: The most expensive commercial deal of the day was for a storage facility at 580 River Avenue in Mott Haven, at $42 million.
The largest new building filing of the day was for a 31,150-square-foot residential building at 304 West 150th Street in Central Harlem. Mike Callaghan filed the permit application.
NEW TO THE MARKET
The priciest residential listing to hit the market was for a townhouse at 131 West 77th Street on the Upper West Side, at $9.4 million. Compass’ Josh Doyle has the permit application. — Research by Mary Diduch
A thing we’ve learned…
Julia Salazar’s chief of staff, Boris Santos, who is challenging Erik Dilan in North Brooklyn assembly district 54, is named after a well-known communist. Apparently his grandmother opened a newspaper one day, saw a mention of the former Russian president Boris Yeltsin and said “that’s a beautiful name.”
Thank you to Georgia Kromrei, who provided this tidbit. Also, thank you to the internet, which delivered a story about Yeltsin ending up outside the White House in his underwear…
Top stories from our other markets:
A startup that maps construction sites has raised $14 million, marking the latest infusion of capital into construction-technology companies by major players in the industry. OpenSpace, which creates 360-degree photo representations of job sites using artificial intelligence, raised $14 million in Series A funding, the company announced Tuesday.
A New York City-based investment firm picked up a multifamily complex in the city’s south suburbs from Robert C. Morgan, the alleged mastermind of a $500 million mortgage fraud scheme. Lenders of the firm, Cyclone Investment, took unusual steps to ensure it was a safe investment. Cyclone acquired the 192-unit garden complex in Richton Park, for $16.2 million.
For Cross Campus’ latest L.A. location, the co-working firm had to do some unusual remodeling. It removed the hot tub that belonged to Death Row Records founder Suge Knight from the roof of the Beverly Hills office building, which had been the label’s headquarters. Cross Campus will occupy the entire 30,000-square-foot building, owned by Freemont Capital Group.
In what will likely be the largest multifamily sale in South Florida this year, NexPoint Residential will pay $322 million for a 1,520-unit multifamily property in Pembroke Pines. NexPoint, a publicly-traded REIT, is under contract to buy the apartments, known as the Avant at Pembroke Pines, for about $212,000 per unit from National Property REIT Corp. — Compiled by Alexi Friedman