WeWork looking at buying buildings

WeWork is looking to buy 401 Collins St in Melbourne.

Global workspace group WeWork is bringing its landlord model to Australia and is in talks to buy up buildings that it occupies, with a Melbourne tower on Collins St being targeted for about $80 million.

The US group, which is headed for a $US47 billion ($69 billion) float on the New York Stock Exchange, set up a near $US3 billion fund to own buildings it occupied in May.

The ARK investment fund aims to raise billions to buy stakes in buildings where it will be a major tenant. The vehicle is meant to begin with $US2.9 billion, including $US1 billion from Canadian real estate investor Ivanhoe Cambridge.

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WeWork is being pitched as the year’s second-biggest float behind Uber Technologies and sparked fierce debate in investment and real estate circles about its sustainability and broader impact on the office sector.

Turning landlord is part of a reorganisation ahead of the float to give WeWork more control over its holdings and to simplify ties with its own chief executive Adam Neumann, from which it had rent­ed some space in buildings he partly owned.

WeWork leased space as part of its asset-light model, but now believes it can reap the lift in value from owning properties it occupies. The model is new locally as WeWork has previously been a tenant of traditional landlords.

Owners and developers have welcomed WeWork into their buildings for the cachet the brand brings and have worked to secure other co-working tenants or to set up their own co-working brands.

In its first move, WeWork is targeting the purchase of 401 Collins St in Melbourne from the Liberman-family-backed Impact Investment Group. Impact had picked up the building in 2014 for $32 million via a sale and leaseback with Roy Morgan Research and then refitted, attracting WeWork.

Impact rejuvenated the art-deco building, now with a net lettable area of 7172sqm, by restoring the heritage facade, refurbishing the lobby and modernising key services. WeWork has a 15-year lease over nine levels.

The deal is being brokered off-market, with the parties involved declining to comment, as talks are ongoing. The move could spur other deals, particularly where WeWork occupies a substantial slab of the building or believes it can add value by owning the freehold and occupying it.

The Australian reported last month that WeWork was in the midst of striking its largest leasing deal in Australia, lining up a whole building to occupy in the heart of Sydney, on the corner of Market and Pitt streets. Taking up the 20,000sqm building at 55 Market St, managed by Mirvac, on behalf of Chinese sovereign wealth fund China Investment Corporation, would dwarf its previous uptake of office space.

WeWork has already swooped on space in several buildings, including 320 Pitt St, where it secured about 11,000sqm in the ARA-owned tower, and it expanded its Brisbane operation by taking 4788sqm in Impact’s timber building at 25 King St.

This article originally appeared on www.theaustralian.com.au/property.