Co-working operator WOTSO looks to cash in on WeWork hype

Australian based shared office space provider WOTSO is set to test investor appetite for exposure to the co-working phenomenon amid heightened global interest in the sector due to the anticipated US float of industry behemoth WeWork.

Listed property fund manager BlackWall is proposing to spin off WOTSO WorkSpace as a separate, stand-alone business on the ASX. Industry analysts suggested it has a capital value of more than $30 million.

It comes amid widespread reports in the US that WeWork, which is valued at $US47 billion in the private markets and backed by prominent venture capital funds, is exploring an IPO.

BlackWall launched the WOTSO brand in 2014 and has internally funded its growth to date. WOTSO has 17 sites covering just over 34,000 square metres. The proposal is subject to a number of conditions including shareholder approval and an ATO ruling.

The business leases site from landlords and the float will be aimed at the small cap fund managers as opposed to investors in the listed real estate investment trusts that are the landlords of the office space.

“We are invested in both BlackWall Limited and the BlackWall Property Trust and have been tracking the evolution of WOTSO closely,” Will Culbert, portfolio manager of URB Investments, said.

“We believe that the proposal gives us the best of both worlds. As a stand-alone entity, WOTSO should have a lot more avenues for growth and is a trusted tenant for new BlackWall projects.”

“WOTSO is a highly scalable operating business,” BlackWall director Seph Glew, said.

“Its network now has the capacity to generate over $30 million of revenue so we feel the time is right for it to stand-alone. WOTSO will be better placed to maximise its potential with a separate dedicated management team.”

On completion of the demerger, WOTSO hopes to expand its operations through joint ventures, strategic partnerships or raising additional capital.

BlackWall’s 1,200 shareholders will hold their existing BWF shares and receive new WOTSO shares on a pro rata basis.

BlackWall chief executive, Stuart Brown, will move across to head up WOTSO.

BlackWall founder, Seph Glew, will take the role of BlackWall chairman. Mr Brown, along with current Chairman Richard Hill and Robin Tedder will remain on the BlackWall board as non-executive directors.

While still relatively small in Australia, the co-working office sector commands about 20 per cent of the global office leasing market and this will only increase, according to leasing agents.

WeWork has 15 sites in Australia and most recently signed its largest lease to date, 11,000sqm of space at 320 Pitt Street in a 12-year deal.

There are suggestions it is also looking at close to 20,000 sqm of space in 55 Market Street, Sydney.

Aaron Weir, partner, head of office leasing, NSW, said co working is predicted to continue its growth globally.

“Knight Frank’s (Y)our Space research shows the proportion of occupiers who have between a fifth and half of their occupied portfolio in co-working, serviced or flexible space is set to increase from 6.8 per cent to 19.3 per cent in three years’ time,” Mr Weir said.

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