Marker
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Marker

No Mercy No Malice

WeWork Is Making Its Comeback

The notorious co-working giant is the beneficiary of the ongoing remote work revolution

Valuation

Any discussion of valuation must be set against the backdrop of a firm’s valuation. Gannett Co., Inc. faces structural challenges, but at a $2.5 billion enterprise value (0.7x revenue), Gannett is undervalued. Tesla is a great product and company, but at $637 billion (20x revenue), it is overvalued (send in the clowns/trolls). Disclosure: I am a shareholder in Gannett and consistently wrong re Tesla.

Why We (might) Work

The wholesale abandonment of office space has been among the most striking fallouts of the pandemic, and it will have profound effects on the way we live and work, long after the virus has been tamed. In New York, new office space is coming on the market 59% leased, down from 74% pre-Covid. San Francisco went from its lowest-ever office vacancy rate to its highest in the same year, and office rents are set to decline by 15%. The worst may be yet to come. Analysts predict that commercial vacancy rates will rise from 17.1%in 2020 to 19.4% in 2021, besting the previous high of 17.6% in 2010. And, as $430 billion in commercial and multifamily real estate debt matures in 2021, lenders will be forced to reconcile the effect of the pandemic on their investments.

Pass the Pipe (Here We Go … Again)

However, Softbank has not run out of real estate opium quite yet. Now it is trying to pass the pipe to Compass investors, hoping the markets enter into the consensual hallucination that a rollup of residential real estate brokerages is (wait for it) a tech company. Yesterday, Compass went public at a valuation of approximately 3x revenue. Realogy, the closest competitor, trades at 0.29x revenue. From the Compass site: