What do you do when you’re a co-working-bar-hybrid startup and you need to raise cash, but getting a bank loan is hard and getting venture funding even harder? You create lease-backed securities for individual desks in your spaces and sell them to investors around the world via the internet.
That thought, at least, is what New York-based Bar Works is doing, earning it The Real Deal’s prize for the most creative real estate funding model of 2016.
Bar Works leases (and sometimes buys) retail spaces and turns them into co-working spaces, with the added twist that each of its locations is also a bar (because having just one keg in your office is so 2015). Customers pay $550 per month for a reserved desk. The company currently has three locations in New York City and one in San Francisco, with three more New York locations, one in Miami, one in Las Vegas and one in Dublin scheduled to open soon. It is reportedly also planning to turn Britain’s famous red telephone booths into mini street offices.
Leasing and fitting out co-working spaces is expensive. WeWork, the industry behemoth, has about raised about $1.7 billion from investors. Regus, another backer of co-working spaces, is a public company with a market cap of around $2.8 billion. It’s tough for startups like Bar Works to compete with that kind of financial heft. To make matters worse, sources say that venture funding for small firms is increasingly difficult to come by. That forces startups to be creative. Enter Bar Works’ so-called Partners program.
Investors can buy individual workstations in Bar Works spaces, which Bar Works agrees to lease from them for 10 years at rates that rise each year. At the the end of the term, investors have the chance to renew the…