WeWork Real Estate Exec Resigns, Says Lease Model 'Not The Right Alignment'
Lawrence Gellerstedt, WeWork's vice president of real estate who oversaw its expansion in the Southeast, has left the company, he told Bisnow Monday.
The son of former Cousins Properties CEO Larry Gellerstedt resigned from WeWork March 1 after nearly two years. During that time, Gellerstedt helped WeWork enter into 25-plus leases encompassing more than 1.5M SF throughout the Southeast, he said.
WeWork has committed to paying tens of billions in rent for its long-term leases, where it has spent heavily to build out spaces to lure short-term tenants. That model worked initially because WeWork and the concept of coworking was new and relatively unproven, Gellerstedt said in a phone interview Monday evening.
“But after a while, it got to the point if you're trying to scale a business like that, you're scaling at a tech pace, but not with tech capital,” Gellerstedt said. "It just wasn't the right alignment."
Instead, he said that a revenue-sharing model with landlords — pioneered by WeWork rival Industrious — is likely the right move going forward for WeWork.
“At the end of the day, it's the landlords that should be meeting [coworking] demand,” he said.
WeWork is operating under a five-year strategic plan it released in November, which focuses on its core workspace business. That includes maintaining long-term leases in major markets while pursuing other approaches in other markets, such as revenue-sharing joint ventures, franchising and management agreements, a WeWork spokesperson told Bisnow.
Prior to joining WeWork, Gellerstedt led Cushman & Wakefield's tenant representation practice in Metro Atlanta as one of the brokerage giant's youngest corporate executives. Gellerstedt said he left WeWork voluntarily for another opportunity, but declined to reveal the new job.
“[Coworking] will be a space I participate in to some extent, but it's not with a competitor,” he said.
Gellerstedt joined WeWork near the apex of its growth and before it ventured on to its failed IPO, which led to a downward spiral for the company and forced numerous changes to the company's C-suite, including co-founder and former CEO Adam Neumann's resignation.
“Where WeWork hit turbulence is it had a leadership issue," Gellerstedt said. "[Neumann and his inner circle] made a lot of mistakes and spent a lot of money on what they shouldn't have."
WeWork named Sandeep Mathrani its new CEO Feb. 1, succeeding co-CEOs Artie Minson and Sebastian Gunningham, who temporarily took the company's reins. Mathrani led the turnaround of General Growth Properties before it was acquired by Brookfield. He has since filled out his leadership team with a new chief operating officer and new chief financial officer, neither of whom have a real estate background.
Two of the goals of WeWork's five-year plan are to achieve profitability by 2021 and positive cash flow by 2022, something that has eluded the company as it has grown. Currently, WeWork has 740 coworking locations in 170 cities worldwide.
Gellerstedt said he believes the company will continue to survive and thrive under its new direction and leadership.
“I think WeWork has a bunch of strong leadership in there now," he said. "They really come around to the realization that at its core it's a real estate company. It has taken the company a long time to get there.
“The people at WeWork were truly the best-in-class, and they all followed this dream that Adam created," he added. "There is still a ton of talent there."