We have a pretty good program lined up for you. I've got Sandeep Mathrani, the CEO of WeWork with me today. And he is the head of the most famous co-working company in the world. It was infamously started by Adam Neumann and then it blew up. You know, there have been books and TV shows about it. And Sandeep's been there picking up the pieces and growing the company. And we'll get into that tonight. And you know, in many ways, as I've told Sandeep this, you know, he's the anti-Adam Neumann. You know, he's not about kombucha taps and walking around the city barefoot. He's from Staten Island and he has a mustache. He's a family guy. Very different. Yeah. So, we're going to go through, you know, the whole trajectory of WeWork and Sandeep's involvement in it and how he got involved. He was at Cushman & Wakefield for 47 years before that. Started in the mail room, worked his way up to the head of the tri-state region. So, it was almost five decades at his job before he took a new one. So, you know, keep that in mind if you've been in your job for a while. You know, there's always, it's never too late to make a change. So, I'm happy to have him here tonight. And welcome, Sandeep.
Thank you. Happy to be here. Thanks everybody for coming tonight. And just one correction. I started out in the engine room, not in the mail room.
Engine room. Okay. It was probably a couple floors down. Yeah, absolutely. All right. Well, Sandeep, I want to start at the beginning. You know, what you walked into. So give us a little recap, you know, as far as you know on the history of WeWork. It was founded by Adam Neumann whose previous company was selling knee pads for babies and you know, did you watch the TV show? What did you know about it like in the early days and all that?
So I obviously, from Cushman & Wakefield, we did some work with WeWork, you know, from some brokerage work around the world, did a number of deals with and for them. So we were intimately familiar from an operation standpoint. It was, you know, it was always a question of is there, you know, can we really fill up all this space? Can they take all this space and use it? So that was kind of the outside looking in. So yeah.
Were you actively doing deals with them when you were at Cushman or...
I was not because I was in the management role and I was the COO at the time that WeWork was really on the upward swing and you know, taking space all around the world and there was an issue with getting paid on our commissions at one point, had a tough discussion with a few people at WeWork. But ultimately, so looking at it from the outside was interesting.
So at the same time this company is growing, kind of exploding all over the world. It became the biggest tenant in New York at one point at its height. So you're kind of seeing that from the outside and you know, meanwhile you're at Cushman. You started in the engine room as you corrected me. Kind of give us the trajectory of your whole career during that 47 years.
I will, but let me just kind of finish that other one up. When they became the biggest tenant in New York City, I think the entire real estate industry just took a deep breath and said, 'Uh oh.' Yeah. Right. Like, how does this happen when they were larger than JP Morgan at that point? And this at its height, it was 700 locations, something like that. It was 7 million square feet in that range in Manhattan alone. Yeah. So anyway, and in retrospect, just to give a little context there, I mean, looking back, it might have been a sign of weakness in the office market at the time that, you know, you were basically having landlords that couldn't fill space otherwise putting WeWorks there instead conceivably, right? More than happy to lease it. Yeah. Yeah. Exactly. They're taking on the long-term responsibility. Absolutely. You know, right. So from my perspective, you know, 47 years with Cushman & Wakefield. Started out, as I said, in an engine room. It was a summer job that I kept for 47 years. I actually wanted to be a fireman. My whole family were firefighters. My father was a battalion chief when he retired, my brother a captain. And you know, as I came out of school, it was 1977, half this room was not born yet. And New York City was going bankrupt and for the first time and I think only time in its history, it was cops and firemen and sanitation men were all getting laid off and it was really tough times. And so I knew at that point even if I wanted to be a fireman, it was going to be a long time before I could get into that role. So I stayed in that summer job and from there ultimately moved up into management of properties and from there kind of started managing the company over years and going global.
So that was when you first got started there. That was the time right when it was 'Ford to City: Drop Dead.' That was the famous New York Post headline. What was it like working even in brokerage at the time? You know, I knew you working in the engineering room, but what I mean, was it like you were putting out fires literally? I mean, the city was pretty rough back then.
Yeah, it really was. It was very different when you came in to work and, you know, being an engineer at the time, you had the early shift and coming in the subways were tough. Just the streets back then and you know, the hookers in the streets and drugs and all that. Bryant Park, which is gorgeous today, right, was Needle Park. Right. Right. Right. But I'm dating myself. All of this.
Well, and the Upper West Side was the panic in Needle Park. Exactly. You ever want to watch a good movie about the 1970s New York? That's really scary. Was it New York is burning or...
Yeah. Yeah. The Bronx is burning.
Bronx is burning. Yeah. So, then you made a transition to management at some point. And what were some of the notable things you did while you were at Cushman? The World Trade Center deal was one of the highlights.
Yeah, that's definitely one of my highlights and it's probably number one on my list, being part of the team as we, along with JP Morgan's, positioned the World Trade Center to be sold to an investor landlord from the Port Authority. And we spent about a year and a half actually pulling all the documentation together, understanding all the systems and so forth and we had built a budget of what a traditional landlord would actually spend. So, right, one of the things I go back to is they had 250 managers. Every time I met or one of my team met with, let's talk about the electrical systems, a room about this size of electrical engineers would walk in and go like, 'What do you all do?' Yeah. And it just repeated itself. So we... Yeah. And so this was the deal when they were selling it off to Larry Silverstein or this was an earlier deal. Yeah. So we ultimately, so we positioned it for sale. We had a number of bidders, went through that process and obviously sold it to Larry, right? Who had it for 6 and a half weeks. Wow. Which is... And then I mean it must have been especially impactful this happening. I mean it's impactful for everybody, but I mean you were in the guts of the building. Well, they, you know, so all those people for a year and a half that I worked with right now in that. So story I haven't told much but I grabbed... Arthur Mirante called me and I was on a conference call. Arthur was our CEO then and he said a plane just hit the trade center. Call Larry, see if you can help. Now he's thinking like a private plane hit the trade center which has happened before. So obviously I can't get anybody from Larry's office on the phone. So I grabbed... So we then saw what happened. So 10 or 12 of us jumped on the subway to go down to hell. And you know, we were in that subway thinking like how do we rebuild this and all that, like all those conversations are going on and when we came out the first tower. Wow. Jeez. And this time you're head of the tri-state region for Cushman. I was the head of global property and facilities management and construction management. So, so then you're involved in all the rebuilding and all that stuff later. Wow. Wow. Yes. We as C&W lost 17 million square feet of what we managed at the time. Wow. When you think of all the buildings around. Wow. Wow. So, wow.
So, we just went through the 70s which was a tough time for the city to get to 2025. So now we're fast forwarding past that into you know 2019 and this is you know a period in New York before, you know, we saw some runup in the property market in some ways and there's this company WeWork that you're sometimes not getting paid by I guess. And 2019 they buy a private jet for Adam Neumann, they lose $2 billion that year or the year before and then in 2019 they try to go public and what happens.
Look, from my perspective, I'm not even watching that at that point, right? There's other things going on in our business, and it wasn't an important part of what C&W was doing at the time, but obviously it went through, was going to go public, had a valuation of 40 some odd billion dollars, and that failed, and they ultimately did go out and it's all history, right? Most people have seen the documentaries or the movies. I've seen, I've watched a little piece. Yeah. Here. Yeah. I think it was at $40 billion, then it went down to $10 billion.
And you know, we always covered WeWork a lot here. Adam hated us covering it because he thought of himself as a tech company. So, whenever we called saying we're calling from a real estate publication, he would get really mad because it reminded him that it was actually a brick-and-mortar business, not some, you know, Silicon Valley startup. And you know, at the time, and I want to get into the, you know, current financial performances, which is a lot better, but we'd also have fights with him over something he would call community adjusted EBITDA, which is basically EBITDA, but adjusted according to the perception of the community, how they felt about the company or something like that. That didn't make a whole lot of sense.
I have no idea what that was. Yeah, exactly. Although somebody did ask me after one of my presentations about the EBITDA you talked about, was that community adjusted? And I said I have no idea what that is.
So fast forward the IPO didn't work. I think Adam walked away with $1.7 billion. They didn't go public then but they went public two years later. They're still way out over their skis. They go bankrupt. Yardi, which is a property management firm, or tech firm, tech firm, buys them. And Cushman had made a little bit of an investment in WeWork like 6 months prior, something like that. But you know, the owner of Yardi puts in a call to Sandeep and says, 'Hey, are you interested in this?' Were you surprised? What, where did that come from?
I'll give you the kind of scenario there. When Onit, you already acquired the majority share of WeWork, I knew Onit for call it 35 years. It's a property accounting software that he has and he's the best in the world with it. So I picked up the phone as a representative of Cushman & Wakefield and I said, 'Onit, you just bought a real estate company, let's talk about how we can help,' meaning Cushman & Wakefield. So we got together, we met. We had a couple of people from Cushman & Wakefield and myself and then three days later he called me and he said, 'You really want to help?' And I said, 'Yeah, I want to help.' So he said, 'Why don't you come in and run the place for me?' And I kind of took a step back after 47 years and I said, 'That's, I don't think Cushman & Wakefield is going to let me do that. I don't know how they would.' So he'd be very busy. So, we talked about it and then I, you know, when I made the decision I actually called, I spoke to Arthur Mirante and Bruce Mosler both as two of my mentors and I said, you know, got this opportunity and Arthur said, 'You got to do it.' Yeah. He said, 'You're the person for it.' And you know, whether I am or not, I then spoke to my wife and my two kids about it. Yeah. And we made the decision to do it.
Yeah. Yes. And she kind of got used to me spending a little more time at home. My daughter had a great line. She looked at me and she said, 'Look, Dad, we love you. You're a great, you know, like your vacation dad. You got too much time on your hands. You're a pain in the ass.' Yeah. Yeah. Yeah. You know, it cuts both ways. I mean, I'm the kind of guy who will listen to my wife. You know, I seems like you are, too. So, you know, you got to take that under advisement.
And I'm sure the payday was good, too. You know, I'm sure there's some good incentives there. So, you came on board. What were the relics of WeWork? What was like the first order of business that you had to take care of? What did you, you know, was it shutting down the free beer taps? What did you have to take a look at?
So, as I entered it was the day that we exited bankruptcy. And look, going into it, I had this concern that the people that were at WeWork were people that couldn't find a job elsewhere at the same salary and everything else. So I was really pleasantly surprised with the team that was in place. I mean they are all top professionals. They're there because they love the company and they love what we do and how we do it. They had gone through, I'll call it, I'll be honest with you, they went through hell through that process, renegotiating leases all around the world, you know, fighting, not fighting, but trying to, you know, dealing with landlords where we were giving back spaces and, you know, not easy. Yeah. Right. And then they did a marvelous job of if we were walking out of a space, if we're leaving a space to transition those members from one location to another location today, you know, as I talk to these firms, our members, and they will tell me that your people handled us with kid gloves. And in some cases, you know, Peter Greenspan and the leasing team actually helped the members negotiate a lease directly with the landlord. So, it's an incredible group of top professionals and we couldn't have accomplished what we have without their help and their dedication. So, I'm really proud of the team that we have.
And there were something like 500 locations and you ended up backing out of 150 or something like that.
Something like that. It was about a third of the portfolio was renegotiated. And here in the states with bankruptcy laws you could leave, you could walk away from your leases. And the rest of the world, bankruptcy is not as easy, right? So we still had, and when I got there we still had about 30 deals that had to get closed, mostly outside the United States, a couple here where, you know, bank properties were going back to lenders and so forth. But, you know, one of the things we've talked about is yes, we went through a bankruptcy. We had to renegotiate leases and everything else. And I remind our team that you're sitting across from a landlord who somewhere in his or her life has gone back to the bank and said, 'Here's the keys.' Right? So, don't feel bad about what's happened, how it's all about. How do you move forward? What's your next step? How do we, you know, put this behind us and become successful? Yeah. I mean, pretty much every landlord's gone through something similar to that. The biggest in the world have done it and we know them all, right?
What was the tough thing about other countries and working through the process?
It's just that much more difficult because it's not, the laws are different, the structures are different, how we held the buildings were different. You couldn't, if the building wasn't held by itself in its own LLC and they could go back to, you know, the other buildings and look at all the profit or revenue that may be coming from those buildings. So again the team handled that really well and we're pretty much wrapped up around the world on all that. Yeah.
Well, it seems like obviously they were sending a clear message in hiring you. They wanted, you know, an adult at the helm and everybody who's worked at different businesses, you know, I mean, it's like, you know, when you have a manager running your department, you know, are they an adult or are they not an adult, right? I mean, that's the distinguishing factor in management in my opinion. But, you know, what, so that's a clear message. What's the vibe you're aiming for with WeWork these days? It's not Adam Neumann, you know, flare. It's not Regis because Regis and those companies are kind of more boring, like it's somewhere in the middle, right?
It absolutely is. So, first of all, from a company perspective, it's about discipline, structure. Our investments are really worked through. Every deal we make has to be profitable. We have, anytime there's a deal over a certain size of a member coming in, we have a team that goes through an analysis and says yes, no, can we restructure it? So it's really that's the important thing, right? So and I've said more than once to our team early on, we have 2x billion dollars of revenue. We need to make a profit. If you've got $2 billion in revenue, there's got to be a way to make a profit. So, we've gone through the tough things of restructuring our staffs, right? Our employees and expense base matches the new portfolio we have today. And so, we have turned that corner. The last two quarters have been EBITDA profitable, traditional GAAP EBITDA profitable, right? No footnotes there. But we are spending significant dollars to reinvest in our property. So we're spending 80 to $100 million this year. We think that's pretty much what we need to spend every year to keep our locations at the very best. Keep our technology up to speed, our spaces clean, you know, great, creative, and so forth.
Yeah. And aesthetically, is it the same? I know it's a more intangible question, but is the style the same? Is the marketing the same? Is the branding the same? I guess three questions in one there, right?
So, the aesthetics, the feel of the WeWork locations that you walk into, it depends. We have some locations that have been around since 2016 and we're upgrading them now. We're refreshing them now, but we have some that have been recently done. And I go to Central Plaza in Dublin, which I was in, going to say about 4 months ago, and it looks like any corporate headquarters in the world with, you know, the dark gray marble. You walk into a boardroom and you've got the wood paneling all around. It's just spectacular. So, it's not all just going to be, and you we talked about this a little bit, not all Midtown, South Loft, you know, it's you want to diversify, a little bit more upscale. You were saying you're going to look for maybe not, you know, the trophy tower, but a trophy type, a little bit more of that type of space. Yeah. If I look around the world, so Central Plaza, if you go to London, we have a building 10 York Road, which we have the entire building. Again, spectacular, spectacular views. The buildouts are great. Really high-end buildouts, and the place is packed. And then you have Salesforce Tower in San Francisco, which we have. And we're on 36, 37, and 38. So fabulous views in the best building in San Francisco. So those are important parts of our kind of DNA but future as well, right? We need to have that statement that we can service from that little entrepreneur all the way up to the biggest companies in the world. And last night we had a little client function and three of the biggest banks in the world were represented there and four of the largest technology companies and a few of the pharma were there. So that's the type of clientele we have. So we need to be able to service them all. Have that core space that's been around for a while and then have that open space and the old WeWork right would have never have done Salesforce Tower in San Francisco. That wouldn't have been part of the... Well, they actually did but you know it was... Yeah, but more of that.
So hot tubs and then we had then they have hot tubs in the... shaking his head. Yeah, that's extra. Talk about the different lines of business because it's not just the traditional, you know, individual blogger and three-person fashion startup. You're getting deals now with Amazon. You just did a 300,000 foot deal with Amazon on 34th Street. One broker was calling it the Canary in the Class B coal mine as far as Class B deals and you know that market heating up. So, it's a different, that's also a different line of business. You want to talk about that?
Yeah. So that's our enterprise business. So the Amazons of the world and a number of our other clients are looking for big blocks of space, but they want to take it on a short-term basis, and we can provide that. So yeah, 330 West 34th Street for Amazon, 300,000 ft, maybe a little bit more. We backed that up with 115,000 over at Five Manhattan West. So, you know, two different, very different types of buildings. But so we've done that, a few buildings here for Amazon and a few buildings around the country and around the world. We've also done that with other clients, right? And others. So, right now, we've got a couple where we're actually building, they're looking for a 30 or 40,000 foot headquarters. We'll put the capital up, we'll take down the lease and we'll provide them all the services, right? And they don't want to, you know, their CFOs struggle, especially now with all the turmoil that's going on in the world. Do they lay that capital out for real estate? It is sunk capital. They can't use it for research. They can't use it for investment in their technology. They can't for whatever their business is. That money is sunk for the term. So, by us putting up the capital, it's a lot easier getting that deal past the CFO.
Yeah, it's funny because you think, right, the question is why wouldn't Amazon just do the deal themselves? But you're essentially, you know, evading their internal red tape processes by doing it for them as part of the attraction.
Well, yeah. The difference is so if Amazon or any of those corporate clients are negotiating the deal, it's a lease that has the attorneys protecting that big company, right? And everything that they do and then you've got the landlord's attorney and it's all about liabilities and all kinds of protections. Our structure with Amazon and the other corporates, and I don't want to keep mentioning Amazon, but with all those corporates is a membership agreement. It's a four-page agreement. Right. Right. Right. We do the deal. We do the lease with the landlord. And our requirements and our speed is a lot different. Right. Because our people, that's what they do. That's what our attorneys do. They're not protecting a whole big company, a global company like, you know, Amazon or somebody else. Right. Right.
