WeWork picks South Africa for first African foray

The WeWork logo is displayed outside of a co-working space in New York City, New York U.S., January 8, 2019. REUTERS/Brendan McDermid

JOHANNESBURG (Reuters) - U.S. shared workspace provider WeWork plans to launch in South African later this year, it said on Thursday, a move that would mark the first African expansion for the $47 billion New York-based company.

The firm, backed by Japan’s SoftBank Group Corp, will team up with Redefine Properties, one of South Africa’s biggest real estate companies, in opening its first location in the upmarket Johannesburg suburb of Rosebank in the third quarter of the year.

“Expanding here is an obvious choice for us: it’s our first location in Africa and, with its global outlook, South Africa is the gateway to the rest of the continent, so we’re excited to welcome new members and grow our community here,” Managing Director Eugen Miropolski said.

WeWork leases office spaces and sublets them out to individuals and start-ups - a model that creates a mismatch between its erratic income stream from clients who can rent for as little as month and the fixed rent it has promised to landlords.

However, in South Africa, WeWork will sign a revenue-sharing lease with Redefine, which broadly means the rent would depend on the revenue it generates from subletting the space, a source familiar with the matter said.

The model is being rolled out to landlords, and is expected to become increasingly common for the company, the source said.

Miropolski also said WeWork had no immediate plans to expand elsewhere on the continent.

“We’re looking to expand our footprint across Africa, and we’re very excited about the potential here, But right now, we’re fully focused on launching in Johannesburg and building our local community,” he said.

In its first release of financial results in August, the privately held firm reported a net loss of $723 million for the first half of 2018 versus $154 million a year earlier.

Reporting by Tiisetso Motsoeneng; editing by Jason Neely