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The Real Deal Los Angeles

WeWork, Rhone Group raise hundreds of millions for property investment fund

Partners to buy buildings where co-working company leases space
By Konrad Putzier | May 08, 2017 10:30AM

Adam Neumann, Steven Langman and Robert Agostinelli (Getty Images)

From TRD New York: WeWork and private equity firm Rhone Group raised several hundred million dollars for a real estate investment fund, according to sources.

The partners have already approached New York landlords about buying properties where the co-working company is a tenant, brokers say, although no deal appears imminent. Fundraising for the vehicle, dubbed WeWork Property Investors, is still ongoing.

The Real Deal first reported in October that WeWork was working on an investment fund. Buying into its properties would allow the co-working company to benefit from property appreciation it says it creates as a tenant.

On March 9, the company filed offering documents for four private equity funds — WeWork Property Investors and WeWork Property Investors Funds A, B and B-1 — with the Securities and Exchange Commission. It wasn’t immediately clear which of the funds the partners are currently raising money for. The filings list several WeWork and Rhone executives as fund directors, as Axios first reported.

WeWork declined to comment for this story, citing SEC rules. Rhone did not immediately respond to a request for comment.

Rhone, founded in 1995 by Wall Street veterans Robert Agostinelli and Steven Langman, is a global private equity firm with offices in New York, London and Paris.

WeWork recently landed a $300 million investment from Japan’s SoftBank, reportedly valuing it at more than $17 billion. The company has been signing leases for new co-working spaces in New York at a rapid clip and currently has 38 locations in the Big Apple, according to its website. Earlier this year it shook up its company structure to give it a more corporate shape and hired Starwood Capital veteran Richard Gomel to head its co-working business.  The SEC filings list Gomel as one of the investment funds’ directors, along with Gross and CEO Adam Neumann.

Woody Heller, an investment sales broker at Savills Studley, said the fund’s success will depend on whether enough investors trust WeWork’s credit and are fine with buying into properties where it occupies a big chunk of space. But the fund could put WeWork in a good position when it comes to competing for properties: it wouldn’t have to worry about raising money, and it would already have a big tenant lined up (itself). “If I’m them,” he said, “I would be doing it.”