Below is the transcript of an interview with WeWork Managing Director for Southeast Asia Turochas Fuad. The interview will play out in CNBC’s latest episode of Managing Asia on 3 August 2018, 5.30PM SG/HK (in APAC) and 23.00 BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan (C): So T, we’re at 71 Robinson Road, this is your second but biggest location here in Singapore, what made you pick this location?
Turochas Fuad (T): So it is, you know, the heart of CBD, it’s the main of main. Every single location that WeWork looks into, we want to make sure that we’re close to life itself. There’s a lot of transportation, there’s a lot of food around, a lot of F&B, a lot of bars around as well. I think this is great for the working community especially because they want to be a lot closer to many different companies around CBD, and this is why we selected 71 Robinson.
C: I understand that WeWork is now evolving from a co-working space business into more of a technology company. Tell me exactly how technology is being used to optimize in this space.
T: So we do use technology in all aspects of things, from the design, the development of our buildings, to the actual operating of our businesses as well. So from the design development perspective, before we build the space, we use laser technology, mapping technology, so that everything is precise. We have sensors everywhere to make sure that we know, how effective or how busy a certain location is, so this helps us with future buildings as well. We know that this design works. This particular way of how we set up certain chairs and certain formats of our meeting spaces are effective. Thus, we will create more of that. If there are ones that don’t seem to have a lot of usage, we’ll do less of those.
C: So now you’re basically driving WeWork’s expansion in Southeast Asia. What are you doing here at WeWork to make it different and unique from all the competitors out there?
T: I’m totally humbled and honored to be a part of this crazy rocket ship that’s moving at this speed. At WeWork, we don’t just see ourselves as a co-working player, we see ourselves as a platform to bring people together. We see ourselves as a community builder, to be honest, to allow people, we call them creators, of different sizes, from one person to a multinational, to come together to really make a life and not just a living. I think that’s the mantra that we’re really sticking to and that’s the culture that we’re really developing, not only for our employees, but for the member companies that are here.
C: So Mr T, in August 2017 you had WeWork buy over your start-up Spacemob to expand in Southeast Asia. You had only founded the start-up just the year before, how did the deal come about? Were you surprised you could exit so quickly?
T: Surprised? Yes. I think it’s because of a common contact that I used to have back in my previous company. We met up again and this person now works for WeWork as well. I think he found that the way we were growing and the way we built our company was very similar to the mantra and the ethos of what WeWork is trying to do in this region. We’re very proud to see that within nine months we’re able to build three locations across Southeast Asia. Long story short, I got the chance to meet Adam Neumann, who’s the co-founder and CEO of WeWork and he and I had a really good chat about exactly what I was trying to do
C: You guys hit it off?
T: We hit it off, in fact I spent a bit more time with him on his farm and we talked a little bit about my life as an entrepreneur because he’s a serial entrepreneur as well, and he asked me a very simple question, he said “T, you know you’ve done a few companies, you’ve been successful in different things, why are you still doing these companies?” He said “What is the reason you are doing that?” He said “T, do you want to join me to make a difference, to change the world? Have you done this before? Have you changed the world?” That took me by surprise. I was impressed by what Adam has in mind in terms of his vision for his company, it’s just not what you see here, it’s not just a co-working concept, it is about changing and revolutionizing and humanizing the way we live, the way we work and the how we connect with one another. That was the reason why I actually sold the company to WeWork.
C: So he gave you a price you couldn’t refuse?
T: It is an opportunity of a lifetime, as they say.
C: Are you happy with the price you got?
T: I’m very happy with the opportunity yes.
C: So exactly how much did he pay you for Spacemob?
T: He paid enough. He paid a lot. We were paid enough. You know I think my investors, my employees and myself were very well taken care of.
C: You know WeWork is successful because we are in a digital age and a lot of millennials are in a digital age, do you think this concept, this co-working concept would have worked ten, twenty years ago?
T: When we first started off, you’re right, a lot of millennials approached us because of many reasons. There’s the whole idea of urbanization, there’s the whole idea of millennials that want something more than just a job. They’re looking for something that has deeper meaning, a sense of belonging. I think that’s why this space helps them get there. That’s why Airbnb became what they are, that’s why uber became what they are because of this whole sharing economy lead by millennials. But lately, we’ve seen a lot of the large MNCs, the multinationals, who we call enterprises, are now slowly coming to WeWork as well. What started off as a single percentage of our membership that consists of enterprises, now we’re seeing more than 25 percent of our members are enterprises. These are companies like IBM, Microsoft, Alibaba, Standard Chartered, HSBC Bank, they’re all now coming to WeWork.
C: So let’s talk about financials, because WeWork actually rents space from landlords, on a long term basis, and then you sub-lease it, a month, a year at a time. Now we know that office rents are rising, how big a challenge is it talking to landlords who want the best yield for their properties? How do you win them over?
T: Oh I think there are many ways. So we do our deals in many different things. So one example, in our upcoming building in Jakarta, the Sinarmas, MSIG tower, it’s a deal where it’s a revenue share with the landlord.
C: Is it all revenue share?
T: So a portion of our deals across the globe are a mix of different structures. Some we lease outright, some we actually do have partnership with landlords, some we do have a portfolio of properties that we work with landlords on. So at the end of the day, we’re not just a renter to the landlord, we’re just not a tenant, but we’re also a value-adding partner to landlords, we’re increasing their yield in addition to rental yield itself. So that’s how we manage our risk all across the different 283 locations that we have around the world.
C: So this revenue-sharing that you talk about, it works in your favor?
T: Actually it works for everyone if you think about it. The landlord gets better yield from just rental alone. We, of course, spread our risk a little bit better. Ultimately, the savings get passed down to our members who are now able to afford some of these locations that we have. Truth be told, even though, about 25 percent of our member base are now MNCs and enterprises, a large chunk of them are still small, medium enterprises and start-ups. They’re able to work in grade-A buildings in the smack downtown of CBD locations because they can afford these locations with WeWork prices. I think, to be quite honest, we’re not the cheapest of cheap, because we are offering a premium product to a lot of our members, but we are able to serve them and their needs of what we’re trying to do.
C: Are all landlords that flexible?
T: As we grow across the region, I think a lot of landlords are beginning to understand what WeWork can do for them and the value that we provide to them. We’re not just activating the building that we’re in, we’re activating the neighborhood that we’re in, (Christine: you’re bringing in traffic) We’re bringing a lot more traffic, all the different retail that are in that building are going to enjoy the upside of the business, and soon, we’re activating the city that we’re in as well, and hopefully the country as we expand across the globe.
C: There are some concerns that your business model is not tested during a downturn, in a recession there are fears that demand could fall, that the rental you charge to clients could actually dwindle as well. Does WeWork have a strategy in place to mitigate this risk?
T: I think we do. So, look, we’ve been around about eight years now, so we’ve learned a lot in terms of the different markets that we have encountered and…
C: But you’ve not been through a downturn.
T: A downturn, well, to be honest, we started during the downturn, right, and I think as we kind of cut across the different markets, as we deal with different landlords and different deal structures that we have, we have also acquired buildings in places like Europe and America as well. There are different types of strategies and tactics that we’re looking at to make sure that we maintain and contain…
C: So will you acquire a building in Asia soon?
T: You know, it’s not in the plan right now but I’m sure if we come across an interesting building that makes sense, yeah we will do that.
C: Well apart from high rents, you also have to incur hefty construction costs to build these really nice offices. In terms of revenue from memberships, how long does it typically take for a location like this to break even and to become profitable?
T: So we’ve been very lucky, we now have four WeWork operating spaces in Singapore and as we open all four of them, within the first month of operation, they are all usually quite full, in fact like almost full. Some locations we have a waiting list right now, and we’ve been very lucky that within months of operating…
C: How many months?
T: Less than four usually, we’re profitable. We’re operationally profitable. It will take a few more months for us to actually achieve return on investment positive.
C: Anything you’re doing to bring down construction costs or increase revenue per user?
T: If you think about it, we’ve been doing this for eight years, we’ve built 283 locations around the world, and we have found a way to scale these costs a lot better. We use technology a lot right? We use technology in terms of building our locations, we use laser mapping, and we use sensors to figure out how to build the most optimized space. Over time, as we build all these…
C: You do it all in-house?
T: All in-house, we have more than two thousand employees around the world that does focus on construction, interior design and architecture. All the way down to laser engineering, we just hired our first laser engineer in Singapore not too long ago. But the whole idea is how are we able to scale this at a cost that makes sense for not only us, but for our partners and for our suppliers, for our developers and all.
C: So speaking of scaling, you’re in Singapore and Jakarta right now, you’re looking for plans to expand to Thailand, I understand Malaysia, Philippines and Vietnam possibly as well. What’s the outlook like for co-working spaces in Asia, where is the growth going to come from?
T: I think we’re still in the starting out phase right? I think as we enter markets like Singapore, now we have a total of six locations if you include the Spacemob location, almost all of our locations are full. As we open up new locations in Singapore, just next month we’re opening up 8 Cross Street, we’re opening up Suntec City before the end of the year and Funan center early next year. We’re starting to fill them up, we actually have a strong demand coming in. The same goes for places like Jakarta, for Bangkok, Manila, and KL as well.
C: How many co-working offices could you have in Asia?
T: That’s a good question. And to be honest with you, we can build as many as it takes for us to really fill up the demand…
C: Do you have a target in mind?
T: To be honest with you, look, in London now, WeWork is considered the largest land occupier outside of the Royal family in London. I think in New York, we’re very close to that as well. The goal is never to become the biggest, I know it just happens to be that way. I think our most important goal is to become a company that shows value to our member companies. From start-ups to freelancers, to now large enterprises, that’s something that we’re very much focused on.
C: So how many locations could you possibly, ultimately have?
T: You know I think as many as it takes to really satisfy our members, I think that’s what we’re going to go after.
C: How many? Ten? Twenty in the next ten years?
T: You know I think we can definitely go a lot higher.
C: So WeWork’s bread and butter is essentially providing work spaces, but it’s getting increasingly competitive, we have property developers themselves also getting into the game. What are you prepared to do to gain market share? Are you going to going to offer big discounts to members?
T: Well no, I think when it comes down to it, I think we’re very much focused on our core value right, which goes down to technology, hospitality, design…
C: But are you prepared for a pricing war?
T: No I don’t really think we need to get to a pricing war, I think at the end of the day, I think our members understand what we’re trying to offer, and it’s not just a collaborative space that we’re looking at. If you look at it, we’re doing a lot more in the “ecosystem of life” as we call it. We’re looking at humanizing the way we work, live and play. We, in other parts of the world, introduce something we call WeLive, we have a school for pre-kindergarten called WeGrow. We have something that we’re bringing to Southeast Asia called WeWork Labs, which is a way to incubate and accelerate different types of start-ups in Southeast Asia.
C: So let’s talk about that, any plans to bring WeWork’s other suite of products into Asia?
T: The plan is yes. We want to make sure that we set up the basic foundation of what WeWork is all about and based on that we will see the demand, we will see what needs to be localized into a product. The good thing about WeWork is that we don’t just come in and offer the same product in every single country that we go to. It’s a global sort of playbook, but at the end of the day, there’s a lot of local execution that comes to it. We are actually planning to bring different types of products, WeWork labs is actually something that is close to me because of my entrepreneur background…
C: When could that start?
T: Very soon, I think we’ve just hired someone to help run that and I want to bring this gentleman over and hopefully get that process going for Southeast Asia.
C: It’s interesting because Powered by We is actually a concept where companies and businesses actually hire your expertise to help build and design your co-working spaces and offices for them. What’s the interest like so far?
T: It’s been very exciting to be honest with you, that kind of ties back to your question in terms of the value that we provide, Powered by We is one such product, we appreciate the fact that many companies have moved to a WeWork location, but for some companies who are not able to move to a WeWork location because of lease obligations, or sometimes they own their own buildings, we can bring WeWork to them and that’s what Powered by We is all about. So we help design, develop, build and operate the space for them to make sure that it has that WeWork feel the WeWork vibe, the design, the technology…
C: Do you have that team already here in Asia?
T: Oh, they’re all put in place right now and we’re talking to a few companies in Southeast Asia. Very close to signing, we can’t talk about them just yet, but one in particular that we can talk about is the one in Hong Kong recently, with Standard Chartered. So Standard Charted basically had a Powered by We opportunity with us where we basically, design, build and operate their space for them, it’s an incubation space for Standard Chartered and it’s very successful for them, and they’re very happy to have WeWork in their location now.
C: Well apart from Southeast Asia, WeWork is also spending a lot of money to get into China, it recently acquired NakedHub in the mainland for 400 million US dollars, but it’s a very competitive market, you’ve got strong Chinese local competitors there, you’ve got UCommune, you’ve got KRspace, does WeWork have a different strategy when it comes to nailing the Chinese market?
T: Well first of all, we didn’t announce how much we bought NakedHub for. I want to make that clear. But yeah we’re very proud to have NakedHub as part of our family now. We see a very strong strategic alignment between the two companies in terms of culture, in terms of technology, in terms of what we do. So now along with NakedHub, we have now more than 40 locations in China, we have 20 thousand members there now. We believe that what we can do to help bring global companies into China, help it make it easier for them to enter China, for us to help Chinese companies to expand globally as well.
C: Are you big enough in China? Do you think you might have to make another acquisition?
T: I think we’re doing fine in China. We’re looking at opening a lot more buildings in China. We are expanding into different cities right now…
C: Will you acquire a building in China?
T: I think the opportunity to acquire buildings is always there. It’s a question of whether the right timing, the right commercial model makes sense. But we are operating in three cities right now, Beijing, Shanghai and Hong Kong, we’re looking at Shenzhen, Chengdu, Hangzhou this year and there’s a lot more cities that we’re covering next year as well. So we’re excited and bullish about China.
C: Just out of curiosity, just how fast is Asia growing for WeWork, what’s the percentage looking like, in terms of revenue?
T: It is the fastest growing region right now. A little bit of a tip, I think last month we have more members basically being acquired in China compared to London. So that’s how fast China is moving compared to the other regions around the world. Southeast Asia is the newest region for WeWork, I’m terribly humbled and ecstatic to be a part of it, but I believe that the whole of Asia is going to be one of the biggest markets, if not the biggest market, the region, for WeWork.
C: As we’re standing here talking, you can get a real sense of the community in this space. What will future co-working spaces feel like? What will it look like? Give me an idea, what lifestyle products are we talking about?
T: So one of my favorite products is the product called Rise by We, it’s a lifestyle gym that’s only available in New York right now, now we’re trying to bring it to Southeast Asia, you know if you consider us taking floors, you know, entire buildings, we can incorporate a sort of co-working environment to a gym, hopefully we can build a sort of a WeLive product which is sort of a co-living product that we have as well….
C: So you could actually co-live in a space that you actually work in?
T: I think in places like New York for example, we do have one building, we have co-living on upper floors and we have you know a collaborative space like this on the bottom floors. Everything is managed by WeWork
C: You started out Spacemob which then got acquired by WeWork. What is it about it about you, and the startups that you founded, that keeps getting acquired? What’s the secret?
T: You know there’s really no secret sauce to it. Truth be told, there’s a lot of timing and a lot of luck to it, but of course a lot of hard work too. But what I do know after starting a few companies and a few enterprises, it boils down to three things. One, I think is to really make sure you build a product that you’re passionate about. Secondly, this is important advice for many budding entrepreneurs, understand your numbers understand your matrix, and understand your P&L statements. A lot of young entrepreneurs forget about the basic fundamentals of business and just go with the coolness of starting a company. That’s not how it works, the business is still there, and the fundamentals need to be there. Lastly, culture. That’s what resonates back to WeWork. The one thing I didn’t realize, that I realized much later, was that I’m pretty good at building teams. I’m pretty good at making sure our team’s excited about it. Finding the right people to work with your company and to make sure I take the time to find the right leaders to join the company. You can call it a secret to success, probably that’s it!
C: So you’ve been described as a serial entrepreneur, during all this time when you are building and selling off startups, what sort of leadership and management style do you use to lead these companies?
T: Look, when I try to interview folks, I don’t really look so much at their academic level or their previous experiences. I ask a lot of questions about themselves, their personality. What I’m looking for is passion and heart. You can always train someone to learn something new or do something completely different, but you cannot train people to get heart, to get passion and that’s very difficult to find. It’s so much easier to manage these guys. You don’t have to go down to the level of micro-managing these folks, it’s a question of saying hey guys, we need to make sure we go after this particular target, or this particular goal, and everyone will understand.
C: You’re the man leading the expansion in Southeast Asia. What’s it like working with WeWork co-founders Adam Neumann and Miguel McKelvey? How much clout, how much autonomy do you have?
T: So one thing that (Christine: who calls the shots?) in fact they give me a lot of autonomy. One of the things that Adam believes in is regionalization. So even though the headquarters is in New York, we have a global playbook, a lot of us we are given the titles of C-WE-Os — Chief WeWork Officers. So we are basically here to run the region. We have the entire team combined. We have architects, we have engineers, we have sales, legal, finance, marketing, every single function that needs to be had to run a business. We have them all locally run here in Singapore as a hub.
C: Any insights you gained from these founders on how you build a business?
T: Absolutely, I think we have a weekly meeting with Adam. We have a weekly call with him and we talk about the mission as a company. Adam is a very spiritual man. When we talk about running a business, we talk about how do we do this at all levels. Don’t forget it was the eco-system that we were trying to build, not just the small business we are impacting but how do we impact and change the world. It’s not just about co-working. It’s not just about co-living, it’s not just about the education but about how to put all these together to really change people’s lives and make a true impact.
C: So T, finally, you’re 43 years old, you’re now helping WeWork expand into Southeast Asia. What’s next? How soon or long before you feel the itch again to start something on your own?
T: You know that’s the question that a lot of people ask of me. But truth be told, every single startup and every single startup that I sold, I don’t really have a plan for what’s next. If you look at my background, my first startup was very much into pure tech base. My second startup was in the travel industry. My third startup was in the real estate industry-slash-technology industry. I think that’s the beauty of life. Don’t plan too much about it. See what comes.
C: What’s brewing in your head right now?
T: To be honest nothing, what’s brewing in my head is how to ensure that WeWork is successful across Southeast Asia.
C: Thanks Mr. T
T: Thank you so much for having me.
For more information contact Clarence Chen, Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630
CNBC is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe with regional headquarters Singapore, Abu Dhabi, London and New York. The TV channel is available in more than 410 million homes worldwide.
CNBC.com is the preeminent financial news source on the web, featuring an unprecedented amount of video, real-time market analysis, web-exclusive live video and analytical financial tools.
CNBC is a division of NBCUniversal. For more information, visit www.cnbc.com.
About Managing Asia:
Managing Asia is the Asia Pacific region’s ground-breaking interview programme featuring CEOs, entrepreneurs and other business leaders.
· Friday 17:30
· Saturday 10:00, 19:00
· Sunday 04:00, 06:00, 08:00, 18:00
· Saturday 19:00, 22:00
· Sunday 01:00, 03:00, 06:00, 09:00, 16:00, 18:00, 20:00
· Saturday 00:00, 03:00, 07:00, 16:00, 19:00
· Sunday 02:00, 04:00, 06:00, 10:00, 15:00, 18:00