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WeWork Planned a Residential Utopia. It Hasn't Turned Out That Way.

After first pledging to upend the way people worked, WeWork vowed to change how they lived: WeLive, a sleek dormitory for working professionals with free beer, arcade games in the laundry room and catered Sunday dinners, would spread around the world.

WeWork Planned a Residential Utopia. It Hasn't Turned Out That Way.

It has not quite turned out that way.

WeLive has not expanded beyond its first two locations and efforts to open sites in India and Israel have collapsed. In addition to long-term rentals, WeLive offers rooms at its only locations, in New York City and Virginia, for nightly stays on hotel sites.

In fact, New York City is investigating whether units legally meant to be long-term apartments are being advertised as hotel rooms in WeLive’s Lower Manhattan building — once billed as a residential utopia with shared living space, communal meals and social gatherings.

Fueled by the charismatic vision of its co-founder, Adam Neumann, WeWork charted meteoric growth that wowed investors and propelled the company to a $47 billion valuation, one of the highest for a startup. But that all came crashing down in recent weeks, as its push to go public revealed huge losses with no signs of profitability any time soon.

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WeWork’s main business is renting out attractively designed office space, but it once projected that WeLive would become integral to the company’s future, potentially driving billions of dollars in annual revenue as it extended into America’s largest cities. Instead, WeLive has become something of a metaphor for the entire company: big promises, but lackluster results.

A WeWork spokeswoman said the company remained committed to WeLive.

“WeWork will continue to operate our existing WeLive locations, delivering an exceptional, community-based living experience for our members in New York City and Northern Virginia every day,” the spokeswoman, Gwen Rocco, said in a statement.

On Friday, the company announced that another subsidiary, the for-profit private school WeGrow, would close next year. The school, which opened in 2018 in the Chelsea neighborhood of Manhattan, is led by Rebekah Neumann, Neumann’s wife.

Like its corporate siblings, WeGrow vowed to revolutionize its industry — elementary school — and pledged to be “elevating the collective consciousness of the world by expanding happiness and unleashing every human’s superpowers.” The class day includes traditional academic subjects as well as yoga instruction, and offers lunches made in a meat-free cafeteria.

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Tuition this year at WeGrow, which has about 100 students, started at $36,000 for 3-year-olds.

The first location for WeLive, in a 27-story former office building on Wall Street, opened in spring 2016 with residents who signed annual leases. The company pitched the building as being cheaper and more convenient than other options in the Financial District, given the free amenities and the utility costs that were included in the rent.

The first tenants in the building’s 207 units were young working professionals, many employed by startup companies, said Zac Hill, 33, who moved there in 2016.

But about a year ago, the building began to change.

Rooms started appearing on hotel booking sites, including Airbnb and Orbitz. Studios with a pull-down bed start around $330 a night. Housekeepers were seen pushing cleaning carts, while guests pulled luggage down the hallways. A front desk — a plastic folding table draped in a black cloth — was added to the lobby.

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People riding the elevators became a mix of residents who knew one another and tourists staying for the night.

“One of the issues with the way they marketed this space is that they talk about it as co-living,” said Hill, who pays $3,000 a month for a one-bedroom apartment.

WeLive still offers plenty of perks to residents like brunch on Mondays and happy hour on Tuesdays. The building recently hosted an evening of wine and painting.

On other nights, DJs and bartenders are brought into the basement club, the Mailroom, which is both where residents pick up their mail and an underground bar with velvet couches and walnut paneling. Rapper Gucci Mane and DJ Mark Ronson have performed there.

It is not clear how many of the building’s 207 units have been marketed as hotel rooms. WeLive opened under terms that allowed it to use up to 125 units as short-term rentals, such as hotel rooms, according to city records. A WeWork spokeswoman did not respond to questions about the building’s vacancy rate.

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The city has opened several investigations into complaints that some apartments have been illegally converted into hotel rooms. Robert Batchelder, 33, who moved into the WeLive building in April, said neighbors have told him that the mix of people there had changed over the years.

He said he had been told “it was better before the hotel, more like a community.”

“Just having the hotel people kind of takes away from getting to know each other,” he said.

A couple who was checking out on a recent Tuesday morning, Arzoo Hasija and Nikhil Kukreja, said they had booked a one-bedroom unit on Airbnb for a trip to New York City to attend a friend’s birthday party.

“It was nice for two nights,” Hasija, 26, said about the room. “But I like bigger spaces, so I don’t think I would ever live somewhere like this.”

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But this is not the WeLive that Neumann had imagined.

In a presentation to investors in 2014, the company projected huge growth in WeLive over the next four years. By 2018, there would be 34,000 WeLive tenants, or, as he put it, “members,” who would drive more than $600 million in revenue — about a quarter of the parent company’s projected revenue, according to the presentation.

A slide listed the top 25 largest cities in the United States and suggested that if WeLive could attract just 1% of the cities’ college-educated young professionals, the company could make nearly $2.2 billion annually in revenue.

In recent days, WeLive shelved plans to open new locations in Tel Aviv, according to local reports. In India, a developer said it was entering the co-living market without WeLive as a partner.

The company had announced plans to open a third WeLive in a new building that is near completion in Seattle. A WeWork spokeswoman, as well as developers involved in the project, did not respond to questions about whether it was still scheduled to open next year.

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The company’s own words in a 383-page filing for its ill-fated initial public offering questions the viability of ancillary projects like WeLive and WeGrow. They “may not generate meaningful revenue or cash flow,” the company said, and “may be unable to achieve profitability for the foreseeable future.”

With Neumann pushed aside, WeLive has lost its biggest cheerleader. Over the years, he would recount how he had first conceived of the co-living idea as a business school student at Baruch College in the early 2000s.

Now WeLive’s chances of surviving as the We Co. tries to recover from its failed initial public offering are slim, said Scott Galloway, a business analyst and professor of marketing at New York University’s Stern School of Business.

“I bet WeLive is wonderful for everyone except the shareholders and We,’’ Galloway said. “There was a total lack of internal controls. Where were the board’s basic questions like, ‘Why are we doing WeLive?’”

The uncertainty about WeLive comes as other co-living companies are thriving and expanding. A London-based company, The Collective, has plans to build a co-living building in Brooklyn, while another company, Common, has more than 12,000 beds under development in multiple cities, including a 600-unit building in Miami.

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“There is huge demand,” said Brad Hargreaves, the founder and chief executive of Common. “The challenge has always been supply.”

During a launch party at the WeLive building in Lower Manhattan in 2016, Neumann spoke passionately about the co-living model. Over treats catered by Milk Bar, he told prospective residents that WeLive was going to change the world and suggested that his family would move in, too. (His wife, who was there, said, “No.”)

In the audience was Nicolás S. Lulli, whose then startup company had operated out of a WeWork location. A WeWork employee suggested that he attend the event. He ended up moving in.

“They made me a great offer,” Lulli, 28, said. “The price they offered for the space we got was far less than we had paid anywhere else.”

Lulli moved into a one-bedroom apartment in July 2016. The differences between WeLive and a typical New York City apartment building were obvious, Lulli said.

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The unit he shared with a woman who is now his wife came fully furnished with modern decorations. It also had a second bedroom, which they did not need, so WeLive agreed to convert it into office space, Lulli said.

They paid less than one month’s rent as a security deposit, compared with the two-month deposit that was common for apartments at the time. Monthly rent could be paid on a credit card, which Lulli did to amass travel points. Wi-Fi and other tech amenities were already set up before he moved in.

On Sunday nights, dinner was brought in, Lulli said, often Chinese, Italian or Mexican dishes, for the residents to eat in the lounge rooms.

“It was cool,” said Lulli, who now lives in Lima, Peru. “But all that stuff costs money.”

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