WeWork China unit value jumps to $5bn after fresh fundraising

Japan’s SoftBank, its Saudi-backed Vision Fund and the Singapore sovereign wealth fund Temasek are ploughing money into a WeWork subsidiary in China, lifting its value fivefold to $5bn.

The $500m investment round also drew the backing of private equity firms Trustbridge Partners and Hony Capital, according to people with knowledge of the deal.

A year ago a similar $500m funding round, led by SoftBank and Hony Capital valued the China subsidiary at $1bn.

The shared office space provider has become a giant in the global property market, buying or leasing landmark buildings including the Lord & Taylor department store on Manhattan’s Fifth Avenue and One Poultry in the City of London. It is also seeking to lease the century-old Flatiron Building in New York.

“This investment will help WeWork fuel our mission to support creators, small businesses and large companies across China,” said Adam Neumann, WeWork co-founder and chief executive.

The company’s rapid growth has propelled it to a $20bn valuation, and a long-mooted fundraising backed by the Vision Fund could lift it further to $35bn, an executive of one investor has said. If it is able to clinch a valuation that high, the company would rank among the most valuable US start-ups, surpassing other privately held groups such as Airbnb and Elon Musk’s SpaceX.

The Chinese subsidiary has been seen by its backers as the next area of growth for WeWork as its business in the US matures. WeWork will continue to own the majority of the Chinese division, where it already counts technology companies such as Alibaba, Tencent and Didi as tenants.

WeWork is expected to use the money to expand its real estate portfolio within the three large Chinese cities in which it already operates, as well as open new co-working spaces in Shenzhen and Guangzhou, two people with knowledge of the plans said.

“Adam Neumann’s vision has always been for WeWork to be a global company with a local playbook, and nowhere is that more clear than in China,” said Ronald Fisher, the vice-chairman of SoftBank. “WeWork has demonstrated that it understands what businesses in China need to succeed.”

WeWork typically signs long-term leases on buildings, renovates them with modern art and coffee bars, then rents out the space to freelancers or large companies.

The company’s fundraising spree has captivated investors. In April the parent company raised $702m by tapping the US corporate debt market for the first time.

But its losses have raised concerns. The group reported a net loss of $884m last year on sales of $886m, according to documents previously obtained by the Financial Times. Bondholders have said they anticipate the company will need further capital injections to fund its expansion.

The company has ploughed ahead. Last month it said revenues had more than doubled in the first quarter from a year earlier and that its occupancy rates were on the rise, bolstering the value of its bonds after a volatile debut. It now counts more than 250,000 “members” globally, including 20,000 in Shanghai, Beijing and Hong Kong.

Source Link: (THE FINANCIAL TIMES LTD) https://www.ft.com/content/b4d1c010-90dd-11e8-b639-7680cedcc421

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