The coworking operator’s superpower: Buying real estate (Focus Property)

The 2019 presentation examined how established coworking operators could purchase and finance the buildings they occupied. Josh Fine outlined the potential advantages of ownership, including control over expenses, protection from lease expiry and wealth creation, alongside constraints such as capital requirements, reserves, reduced mobility and responsibility for building costs. The deck introduced core real-estate finance measures, including effective gross income, net operating income, annual debt service, loan-to-value ratios and debt coverage ratios. An illustrative office-building model demonstrated how income, vacancies, operating expenses, financing and capitalization rates affected valuation and cash flow. Fine argued that an operator could improve a partially vacant property’s income by occupying space itself, while emphasizing that the coworking business still had to afford market rent. Further examples covered acquisition costs, preferred-equity structures, investor returns and a refinancing scenario after three years. The presentation also identified risks such as rising capitalization rates, higher vacancies, unexpected capital expenditure and dependence on coworking revenue. It concluded with alternatives to direct ownership, including joint ventures with building owners and fee-based management agreements.

Key findings

• In an illustrative model, operator occupancy increased NOI from €2.0 million to €2.6 million and the calculated property value from €26.67 million to €34.67 million.
• A sample €28.5 million acquisition used a 75% loan of €21.375 million and required €7.125 million in equity.
• The preferred-equity example allocated 90% of the required equity to an investor and 10% to the operator sponsor.
• In the three-year refinancing example, a new €26.891 million loan produced €6.407 million in proceeds after repaying the old loan and estimated closing costs.

Presented by Josh Fine, Focus Group of Companies, at Coworking Europe 2019