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WeWork's CEO Makes Millions as Landlord To WeWork (wsj.com)
An anonymous reader shares a report: For more than two months after employees at IBM moved into a Manhattan building managed by office space giant WeWork, frequent elevator problems forced workers to climb the stairs of the 11-story building and prompted complaints to the company. One of the landlords behind the building was no ordinary owner: It was Adam Neumann, WeWork's chief executive, who leased the property to WeWork after buying it [Editor's note: the link may be paywalled; alternative source], according to people familiar with the situation.
Mr. Neumann has made millions of dollars by leasing multiple properties in which he has an ownership stake back to WeWork, one of the country's most valuable startups. Multiple investors of the privately held company said the arrangement concerned them as a potential conflict of interest in which the CEO could benefit on rents or other terms with the company. [...] WeWork, which was recently valued at $47 billion by investor SoftBank, signs long-term leases for office space with landlords, then subleases the space on a short-term basis to companies. Mr. Neumann, the 39-year-old executive who founded WeWork in 2010, is WeWork's largest individual shareholder and has voting control over the company.
Mr. Neumann has made millions of dollars by leasing multiple properties in which he has an ownership stake back to WeWork, one of the country's most valuable startups. Multiple investors of the privately held company said the arrangement concerned them as a potential conflict of interest in which the CEO could benefit on rents or other terms with the company. [...] WeWork, which was recently valued at $47 billion by investor SoftBank, signs long-term leases for office space with landlords, then subleases the space on a short-term basis to companies. Mr. Neumann, the 39-year-old executive who founded WeWork in 2010, is WeWork's largest individual shareholder and has voting control over the company.
That’s how you siphon off money from startups, struggling companies or even foundations into your own pocket.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
I was told a yarn when I worked at Hess about how all the artwork in the building in Houston was owned by Hess himself and when he retired he leased all the artwork back to the company. He allegedly made more after he retired then when he ran the company.
"A person is smart. People are dumb, panicky dangerous animals and you know it." - K
Self dealing and raiding public company to fill private coffers? Check
Corrupt? Check
I see a future presidential candidate from a major political party.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Money that could be used to grow the start-up to make it thrive and prosper is just lining the pockets of an already wealthy individual. Can I just say, we don't hate on the rich enough. At least not this type of rich. They're the ones killing jobs, not those pesky immigrants or regulations.
I wonder if the whole Millenial hipster open-space preschool workplace thing will survive this latest tech bubble...but WeWork is guaranteed to profit. Apparently they're one of the largest commercial landlords in the world and they seem to specialize in this free-flowing startup space. It's akin to selling prospectors supplies on their way to the gold fields.
Whenever I see self-dealing like this, I simultaneously think that it's totally unfair that things can be set up this way, and wonder why I don't take advantage and profit from it. :-) Most business owners structure their affairs in such a way that their company is buying everything they own to offset any profits that pass to the owner. And then they complain bitterly about taxes. It seems ludicrous that I can set up Bob Smith LLC, have Bob Smith LLC purchase a car in the company's name, rent houses and offices, etc. and I would work for Bob Smith LLC as the CEO paying myself a salary of $1/year. This happens all the time with small business owners. I know that the "corporate veil" can be pierced if the IRS or someone suspects this is going on, but the reality is there are way too many ways to avoid it.
We'll see what happens when Dotcom Bubble 2.0 crashes in the next year or two and the VC funds used to rent these offices dry up. I'm assuming WeWork will be just fine though...here in NYC people will give you their life savings for a closet and a hot plate.
The president of the United States makes billions sending dignitaries with deep pockets to his own resorts and hotels; perhaps that is the bigger issue.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
So, Neumann takes on the debt of buying the building, rather than WeWork, while providing the stability that WeWork won't lose their lease because the building owners don't like them, or get a better offer.
What's the problem?
This. There's a reason that Ray Croc's face is on display at darn near every McDonald's in the nation and it's not because he came up with the McDonald's business model as much as he came up with the McDonald's realty scam. There was an interesting movie about it on Netflix not too long ago.
You are correct! I forget the exact language, but it is something like the salary must be normal for the industry. I have an S corp and you even pay unemployment taxes on the salary you pay yourself even though as an officer of the company you cannot collect unemployment.
Very much so. Ray Croc discovered that the McDonald's brothers had created a kitchen that optimized workflow efficiency and pumped out consistent quality food. He struck a deal with the McDonald's brothers where he went around the country franchising out the McDonald's business model. However, Ray was not profiting as handsomely as he'd like from franchising. He eventually added a clause that McDonald's franchises had to be built on land leased from a second realty company that he created. After that, Ray did a hostile takeover of the McDonald's brothers, who had never been a part of the realty company. One of the stipulations of the buyout was that the McDonald's brothers were gagged about telling people that Ray Croc was not the actual found of McDonald's, and the McDonald's brothers are slowly forgotten from the franchise's history. I do not discredit the McDonald's brothers for running a good business, I simply note that Ray Croc may very well have invented the move that the WeWork CEO is using - using realty to buy out the whole the business from those that really built it.