One of the many companies which has changed the matter how office workers work is called We Work. In an article by Herbert Lash of Reuters, We Work is looking to sell stock to value the company around $47 billion.
We Work owns very little property, it leases it and then subleases to many smaller companies. The smaller companies have space to do work, have use of a board room and depending on the location they may be able to network with other smaller companies. We Work is taking advantage of the different ways consultants and start ups work and have locations in former department stores to maximize the real estate adage of location, location, location.
On the other side of the coin are larger property developers such as Boston Properties which has 196 properties and has a market value of $20.2 billion. Boston Properties stock has gained less than 15% in the past 5 years.
Critics of We Work’s valuation will suggest that if the economy turns downward, then the model of We Work does not work. If there is a downturn, the client base will be reduced as people will return to home offices, coffee shops, and anywhere there is free wi-fi. In addition, in a downturn rents in Class B and C buildings are very competitive, sometimes there are leases to be gained in Class A buildings.
Linking to dividend paying stocks, consistency of earnings through a couple cycles is what dividend investors are looking for. It is easier to make money when the economy is doing well or seemingly doing well for the majority, it is different when the general economy is a slump. How does your company make money? What are its margins? and how many downturns has management been through and still make money?
There are more questions than answers, till the next time – to raising questions.