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Other Peoples’ Money Gives WeWork More Life

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Shared office space dressed up in mustached men, vegan meals, and beer, might have met reality as bond investors grow cautious about WeWork Cos.’s financials. What does WeWork really do? The real estate company takes out massive leases in expensive cities, revamps them with designs and comforts, and then sells (subleases) desks and spaces to small companies and individuals.

WeWork is competing against incumbents in office flexspace like Regus and Servcorp by offering more services and brand culture. The company is also trying to lease large offices to companies like Pepsi and Salesforce. This darling of the real estate financial media press was co-founded by Adam Neumann and Miguel McKelvey. WeWork is attempting to create a lifestyle business that fits with Neumann’s mantra. The unicorn company has a no-meat policy, serving vegan foods at events, while having yoga opportunities for its employees to benefit from.

Funding

WeWork’s U.S. dollar-denominated bonds are yielding 10.5%. This is not scaring off WeWork’s prime backer Japanese telecommunications conglomerate SoftBank Group led by billionaire Masayoshi Son. The SoftBank Vision Fund, which is backed by major sovereign wealth funds like Mubadala Investment Company and the Public Investment Fund of Saudi Arabia, were a bit nervous about the fund putting too much capital into the debt-laden WeWork. SoftBank had discussed kicking in US$ 16 billion in WeWork at the end of 2018 to grab more control; however, it looks like WeWork is getting US$ 2 billion in 2019. The US$ 2 billion is coming from SoftBank itself, not the Vision Fund. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Qatar Steps Up for Lebanon, Plans $500 Million Bond Purchase

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Qatar Sheikh Tamim bin Hamad Al Thani appeared at an Arab economic summit and it was revealed that Qatar plans to purchase US$ 500 million of Lebanese government bonds. Earlier, there was speculation Qatar was going to deposit US$ 1 billion in Banque du Liban (Bank of Lebanon), which was never confirmed by the bank.

Lebanese officials in January revealed the possibility of a debt restructuring. The International Monetary Fund calculated that public debt in Lebanon is at over 160% of gross domestic product this year and could raise to around 180% by 2023.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Turkey Wealth Fund Could Provide Support to Credit Card Debt Market

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Recep Tayyip Erdoğan, the President of Turkey, has a new reform to jump start the consumer debt-laden economy, and it involves Turkey’s sovereign wealth fund. His strategy is to offer money to those facing overwhelming credit card debt. Ziraat Bank (Türkiye Cumhuriyeti Ziraat Bankası) will allow borrowers to apply for debt rescheduling and secure lower interest rates. Erdogan announced that “Any retail client from any bank can apply.” Credit card debt is a monstrous problem in the country. Consumer credit has exploded due to low rates, government assistance, and easy credit availability. Last summer, non-housing debt reached US$ 97 billion. Half of this is credit card debt. Over US$ 30 million is non-performing. The debt was accumulated in foreign currencies, because they used to provide the lowest interest rates. Unfortunately, as the Turkish lira’s exchange rate cratered, much of the debt became impossible to service. The lira is among the world’s weakest currencies. Erdogan expects a smooth transition, “They will pay off their debt with a loan from Ziraat, and will pay it back according to the level of their monthly earnings.” Ziraat Bank is managed by Turkey’s sovereign wealth fund, which is chaired by President Erdoğan.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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KIC Sells City of London Office to South African Investor

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Investec Structured Property Finance, part of Investec, provided a £107 million loan to a South African investor being represented by London-based Pembrey Asset Management Ltd to acquire an office in London at One Bartholomew Lane. The Korea Investment Corporation (KIC) is the ultimate owner of the office and is selling it through Hines UK, part of Hines. BNP Paribas Real Estate acted on behalf of Pembrey Asset Management and CBRE acted on behalf of Hines.

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