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Five things we just learned about WeWork

A WeWork space on Water Street in Boston’s Financial District was recently leased by busines catering service ezCater.
A WeWork space on Water Street in Boston’s Financial District was recently leased by busines catering service ezCater.(David L. Ryan/The Boston Globe)

WeWork is on the verge of becoming the biggest renter of office space in downtown Boston. It’s also on the verge of becoming a publicly traded company. On Wednesday, the co-working company released detailed financial statements ahead of an IPO that’s expected in September. That allows investors — and us — to take a look under the hood at this office market behemoth, which sublets office space to startups and other types of firms. Here are five things we learned from the disclosures:

WeWork is growing really fast. As it has in Boston — where the company has quickly opened or leased 16 locations — WeWork is rapidly scaling up around the globe. The company said it had 528 locations in 111 cities worldwide as of the end of June. That gives it room to house 604,000 “members,” roughly double the space it had a year ago. What’s more, WeWork’s building out another 522,000 desks’ worth of offices and is in negotiations to add 724,000 more.

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WeWork is still losing a lot of money. The company is on pace to top $3 billion in revenue this year, a sizable jump from the $1.8 billion it reported in 2018. It’s also on track to lose $1.8 billion, due mainly to leases and operating costs at its locations — not pre-opening costs or marketing. WeWork lost $1.9 billion in 2018, so you could say those losses at least aren’t getting worse. But investors tend to prefer companies that actually make money, and WeWork is still a long way from that.

WeWork has broader ambitions. Believers in the company’s business model point to another famous startup that burned cash for years: Amazon. Jeff Bezos’s baby, of course, eventually grew to dominate global commerce — in hugely profitable fashion — by expanding far beyond its initial niche (selling books on the Internet). Although WeWork is perhaps not quite that ambitious, it clearly has broader goals. The second sentence of its 220-page prospectus is: “Our mission is to elevate the world’s consciousness.”

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Details on how it might accomplish such a feat are scarce, but the fine print does discuss plans to expand its WeLive housing product — furnished, flexible apartments currently in two buildings in Manhattan — and WeGrow, a private elementary school it opened last year.

WeWork is still just a landlord, albeit a big one. The company disclosed that it has $47 billion in lease obligations to its landlords, with an average term in the United States of 15 years. That’s a lot of money it will owe for a long time if something goes sideways. Meanwhile, WeWork’s average tenant is signed for just 15 months — a term that has almost doubled in the last year as the company has pursued more corporate clients — and it has about $4 billion in future leases already committed. Those two numbers will need to keep rising if WeWork hopes to quiet skeptics who wonder if it can possibly survive for the long haul.

We’re no closer to knowing how WeWork may fare in a downturn. The IPO is coming as alarm bells ring about the state of the global economy. Just this week, both Germany and Britain reported their economies shrinking, while the United States and China remain locked in a mounting trade war.

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These countries, especially the United States and Britain., are huge markets for WeWork. It’s easy to see how a recession could turn bread-and-butter clients — the startups that power cities like Boston — into toast. That might turn WeWork’s bustling offices into ghost towns and make the $47 billion in lease obligations a crippling anchor.

Or not. WeWork maintains that, in a downturn, freelancers and new startups will find its flexible lease terms especially attractive and be keen on growing their companies instead of managing office space. Still, even WeWork admits to harboring some doubts.

“While we believe that we have a durable business model in all economic cycles,” it wrote,” there can be no assurance that this will be the case.”


Tim Logan can be reached at tim.logan@globe.com. Follow him on Twitter at @bytimlogan.