Two years ago, the real estate industry wondered if WeWork would collapse under its own weight. Now, commercial brokerage giant Cushman & Wakefield is counting on the flex-office provider to help it attract and retain corporate service clients.
Late last month, the company closed on a $150 million partnership deal with WeWork, which has stabilized since its chaotic 2019 and went public on Oct. 21 through a SPAC merger. With the investment, Cushman has acquired 15 million shares of WeWork’s Class A common stock at $10 per share.
But Brett White, Cushman’s chairman and CEO, said the “exclusive strategic partnership” with WeWork means much more than just owning those shares because it will enable Cushman clients to benefit from WeWork’s ability to create and manage appealing flex offices.
“Through this partnership, we will help scale WeWorks’ tenant-experience platform from beyond just their branded centers into the rest of the office market starting with our clients,” White said on an earnings call Thursday.
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WeWork’s contribution is important, White said, because creating attractive workplaces is a priority for many large corporations as they try to bring back employees who have been working from home during the pandemic.
Incoming CEO John Forrester chimed in, saying that large corporations have increasingly been outsourcing office management services by hiring a global firm such as Cushman by buying a bundle of office services. “But the definition of a full-service offering has changed over the last two years to now include a flex offering as part of the base-ask in any outsource,” Forrester said. “And that’s where we will benefit significantly from our exclusive partnership with WeWork.”
Even without WeWork’s help, Cushman continued to recover its financial health in the third quarter from the pandemic-driven downturn. The firm recorded $2.3 billion in revenue during the quarter, exceeding the 2019 level. Net income for the quarter was $68.7 million, up 30 percent from the second quarter. (The company recorded a net loss of about $37 million a year ago.)
The firm partly attributed the gains to investment sales activities, which recorded $330 million in revenue, more than double the amount from the same quarter last year, and up 38 percent from 2019. Leasing revenue was $458.6 million, up 43 percent from a year ago, but down 2.5 percent from the 2019 level, mainly because office leasing has yet to come all the way back.
Adjusted EBITDA was $219 million, up 87 percent from a year ago. The figure, however, was slightly less than in the second quarter, mainly because of the increased cost of doing more transactions, including performance-based compensations, according to the company.
In addition to the WeWork deal, Cushman also agreed to pay $500 million for a 40 percent stake in Greystone’s agency, Federal Housing Administration and servicing business. In the deal, which is expected to close later this year, Cushman is adding lending and loan services to its multifamily capabilities.