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Members work on laptop computers in a common room at the Embarcadero WeWork Cos Inc. offices in San Francisco, California, U.S.(bloomberg)
(Bloomberg) -- UBS Group AG decided last year that its 30-year-old wealth management office overlooking the Hudson River needed a fresh look. So it hired WeWork Cos., a trendy operator of shared offices. The startup presented a clear vision: You need a juice bar, meditation room and a lot more greenery.
The deal between the bank and the New York-based co-working company is the biggest by revenue for WeWork’s Powered by We business, the startup said. WeWork established Powered by We last year to offer real estate, design and office management expertise to large companies. It also allows the startup to reduce its need to take on expensive office leases and instead help redesign and run spaces that customers already inhabit. Construction on the UBS space will begin mid-next year. Both companies declined to comment on terms of the agreement.
UBS was interested in WeWork’s promise of making the workplace more convivial for the employees who make investment decisions on behalf of the bank’s wealthiest clientele. “What can we do to help make that more of a communal atmosphere?” said Tom Naratil, co-president of global wealth management at UBS. “I don’t want to say ‘make work fun,’ because that sounds a little ridiculous, but something that makes it more of an enjoyable experience.”
Since its founding in 2010, WeWork has expanded from offering flexible office space for startups to serving up several-year leases for corporate customers, which now make up a quarter of its membership base. WeWork is looking for new revenue sources to justify a valuation of $20 billion—or as much as $35 billion, if its latest fundraising effort pans out—and to expand more quickly than competitors around the globe. Minimizing its reliance on expensive, long-term leases would help. To cover some of those expenses, it raised $702 million in April, when it sold bonds rated as junk by credit agencies.
Powered by We has 30 customers and 11 spaces currently in use, including an office for Standard Chartered Plc in Hong Kong. WeWork declined to name other customers, but people familiar with the agreements said another is Expedia Group Inc.’s office in Chicago. WeWork said it’s in preliminary discussions with Sprint Corp. to redesign the telecom’s headquarters in Overland Park, Kansas.
Powered by We generated $13.7 million in revenue last year after $12.7 million in construction costs, according to documents seen by Bloomberg related to WeWork’s bond sale. A spokeswoman confirmed the numbers from the document but declined to comment further on the unit’s finances.
UBS went with WeWork because the bank wanted fresh ideas for its space in Weehawken, N.J., which spans more than 100,000 square feet. But their styles have clashed at times. UBS’s current entrance is similar to other banks, where clients and employees often take separate elevators and occupy different areas of the building, partly for security purposes. WeWork proposed adding a staircase that instead invites clients and employees up together to the second floor, where plans call for the juice bar and a coffee stand with a barista.
“They were actually pressing us much farther than we wanted to go,” Naratil said. “They said, ‘If you want people to work in a silo, shove them into a silo on their way to work.’”
The staircase prevailed. Naratil called it “airy, light and a bit more inviting than just popping into elevator banks.” Another option Powered by We provides is staffing on-site to help run offices, but UBS hasn’t yet decided whether it will buy that service when the project is slated to finish in 2021.
Dave Fano, WeWork’s chief growth officer, said more financial institutions are starting to embrace a different aesthetic—with details like trailing curtains of plants and low-slung lounge chairs—instead of traditional marble lobbies. “I don’t want to stereotype too much, but I think stones and dark wood and things like that, some of that is going away,” Fano said. “There aren’t that many plants in the current UBS.”
Wall Street is looking for ways to shed its ivory tower image and lure talent away from other industries. Naratil said younger employees at UBS expect a more communal atmosphere. “I don’t want to say it’s a generational thing, but I do think that as we’re getting a higher and higher percentage of our workforce that is millennial, they’re asking a few more questions,” he said.
UBS has been cutting costs in the wealth management unit, which oversees about $2.4 trillion. Its chief executive officer even held talks with Credit Suisse Group AG about cost-sharing initiatives, Bloomberg reported in April. For the office renovation, WeWork was not “the cheapest option,” Naratil said, but he saw value in trying to keep employees happy.
Fano runs Powered by We alongside Veresh Sita, whose external title is head of enterprise but is known internally as “chief we officer of enterprise.” He’s one of five or so CWeOs, a title given to regional or division heads where “We” isn't just a pronoun but a catch-all term for community spirit, as explained in a manifesto on WeWork’s site, We.co.
Naratil’s team at UBS was intrigued by the power of “We.” “Our usual course would have been to hire our standard team of architects we’ve used in the past and ask the team do something WeWork-like,” Naratil said. “But the more we talked to the team at WeWork, the more we felt they had something extra to add.”
For more on WeWork, check out the Decrypted podcast:
--With assistance from Sonali Basak and Gerrit De Vynck.
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