Indian-American steps in to help WeWork sustain itself

Sandeep Mathrani replaces Artie Minson and Sebastian Gunningham, the co-chief executives

WeWork, the troubled operator of shared office space, has named Sandeep Mathrani, a senior executive at the commercial real estate company Brookfield Properties, as its new chief.
 
Mathrani replaces Artie Minson and Sebastian Gunningham, the co-chief executives. Minson and Gunningham took over in September from Adam Neumann, the WeWork co-founder whose growth-at-all-costs strategy brought the company to the brink of financial collapse last year.
 
In a statement, Mathrani said WeWork had “redefined how people and companies approach work with an innovative platform, exceptionally talented team and significant potential if we stick to our shared values and maintain our members-first focus”.

 

The appointment of Mathrani, who is set to start on February 18, would be an important part of WeWork’s attempts to build a business that could sustain itself in the fast growing but highly competitive market for flexible office space.
 
Mathrani has been chief executive of Brookfield’s retail division since August 2018, according to his LinkedIn page.
 
The naming of an experienced real estate executive is a clear indication that WeWork is moving on from Neumann’s strategy of building a sprawling company with lofty aims that included transforming how people work and live together.
 
He had promoted WeWork as if it were a groundbreaking technology company set on upending its industry. The firm had also branched out well beyond office space, establishing sleek dormitories for working professionals and even a private school in Manhattan.

 
WeWork withdrew its much anticipated initial public offering in September. SoftBank, WeWork’s largest outside shareholder, agreed in October to bail out the company. Marcelo Claure, a senior SoftBank executive, became WeWork’s executive chairman and has been overseeing the company’s overhaul, which involves pulling back from certain markets, selling off noncore businesses and finding new ways to finance its operations. Claure will continue as executive chairman.
 
Mathrani, who did not respond to a request for comment, faces some daunting challenges, not least the struggle to fill all the new locations that WeWork expects to open in 2020. The company has said that it could open 600 spaces this year, almost doubling the size of its network.

 
Commercial real estate executives said Mathrani probably had strong relationships with large landlords, which might prove useful as WeWork goes through its restructuring.
 
In an interview in December with The New York Times, Claure said WeWork might seek to renegotiate leases with building owners at some locations. “We’ve been very straight with landlords and said, ‘Look, this is its own independent business,’ and if things don’t work out, sure we’ll have conversations with landlords,” Claure said. “There will be some of that that’s starting soon.”
 
Commercial real estate executives also said that Mathrani’s experience in retail could prove particularly valuable. In retail, the goal is to create locations that customers want to keep coming back to. WeWork would benefit if its customers stayed in locations for longer. A big weakness in the company’s model is that it leases space from landlords for far longer than its customers rent space in WeWork locations.

 
WeWork leases office space, refurbishes it and then rents it out to individuals and companies. This type of real estate business has grown quickly because it allows customers to rent for shorter periods than would be available under traditional leases. Neumann had tried to give the business a special allure, saying it gave rise to a sense of community in the workplace that would drive creativity and bring meaning into people’s lives.
 
SoftBank has agreed to plow over $6 billion of new money into WeWork, with the hope that the financing will give the company breathing room to build a sustainable business. WeWork needed the investment because it was spending far more money than it was taking in as it expanded rapidly. In January, WeWork said it had sold its minority stake in the Wing, a collection of work and community spaces for women, to a group of new and existing investors in the Wing.

 
©2020 The New York Times New Service