Wotso - Blackwall Property Trust (BWR) Blackwall Ltd (BWF)

Any thoughts on this given the interlinked nature between Wotso and Blackwall? Revenue stream from Wotso 30% of rental income of the trust. Wotso was spun off as a seperate entity by Blackwall in late 2019 with a public listing of Wotso announced for early this year. This appears to now have been cancelled.



https://www.businessnewsaus.com.au/articles/wotso-to-benefit-from-blackwall-rent-deferrals.html

 

The sector seems to be caught in a perfect storm...

 

Background to the spin off...

 

Proposed $40M raising... Wework pulled its float in September last year...


https://www.smh.com.au/business/sma...ppetite-with-40m-raising-20200106-p53p54.html

 

This is concerning though...

 

Serious concerns for the Co-Working sector may derail any further hopes of ASX listings..

Is The Co-Working Space Dead?


Weekly Reports | Jun 19 2020



By Tim Boreham, Editor, The New Criterion

https://www.fnarena.com/index.php/2020/06/19/is-the-co-working-space-dead/

 

Interesting perspective from the founders of Depot8...



https://www.smartcompany.com.au/coronavirus/covid-19-depo8-co-working-space-closed/

 

With industry break even levels at 80% occupancy, it appears that the co-working sector is facing more closures given the cash burn involved...

Wotso’s 17 locations are housed in 10 Blackwall Properties and 7 in leased premises with non party related landlords... The lease payment waivers / deferrals cannot go on forever given the level of occupancy being recorded across the sector.

The other issue for Blackwall is the related party nature of the cross ownership including that of office holders. Any rent waivers / deferrals cannot be at the expense of other Blackwall investors.

Any conflicts of interest need to be managed in an independent commercial manner at arms length of office holders who have a vested interest to see Wotso survive. Given the impact on Blackwall of the interrelated financial health of Wotso (30% of Blackwall’s rental revenue), it would be incumbent on Blackwall to issue a statement to investors on the monthly occupancy levels and “actual” income streams of Wotso’s operations in Australia and overseas.

The wisdom of a business model where 30% of a REIT’S income is from a related party entity which requires a very high occupancy to break even, is another matter which investors will need to address with the board in due course... COVID -19 has applied the pressure and the stress fractures across the co-working sector have started to appear...

https://www.fnarena.com/index.php/2020/06/19/is-the-co-working-space-dead/

 

The idea was always BullSh#t...

https://www.smartcompany.com.au/startupsmart/op-ed/joan-westenberg-co-working-dead-covid-19/

 

Where will this leave Wotso and Blackwall Trust ??? Analysts need to dig deeper and evaluate whether Wotso is a ticking time bomb...

https://allwork.space/2020/06/could-australia-be-left-with-just-three-coworking-operators/

 

Once the government support is wound back, I don’t see many of the co-working operators surviving... As the attached article discusses, there are likely only three operators which will survive. Smaller players like Wotso are heavily exposed and cannot pay the rent with cashflow drying up...

The impact on BWF will be significant as Wotso accounts for 30% of its rental income. BWF is flying under the radar at the moment but will soon have to fess up about the ability of Wotso to continue trading as a going concern... Issues of insolvent trading may evolve when the company law changes expire in 3 months time...


https://allwork.space/2020/06/could-australia-be-left-with-just-three-coworking-operators/

 

My concern in not so much about BWR AND BWF it’s about Wotso being able to meet its debts as they fall due as 7 of the locations are not owned by BWR. There will be an impact on BWR, but the picture for Wotso does not look good... New Tag line might be “Wotso we’re F#cked ?”...

 

Gearing now at 24% with new drawdown..

This may seem conservative but can spiral if Wotso burns cash which it seems to be doing.. The back rent cannot be deferred forever..

Victory co-working had to raise over $15M from investors. Wotso hasn’t even floated so does not have that angle. I’m sure BWR will have to make a choice soon as to what to support and what it will have to jettison...

https://www.businessnewsaus.com.au/articles/wotso-to-benefit-from-blackwall-rent-deferrals.html

 

Some sage advice indeed...

https://simplywall.st/stocks/au/rea...erty-trust-asxbwr-before-it-goes-ex-dividend/