Table of Contents WEWORK COMPANIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2019 (UNAUDITED) market transaction, the December 31, 2018 carrying value of the preferred shares acquired during 2017 include an unrealized gain of $8.0 million based primarily on level 3 inputs of the fair value hierarchy, including the enterprise value implied by the 2018 round of financing and other inputs. (4) During 2018, the Company acquired a 5% interest in Waller Creek, through WeWork Waller Creek, for $6.5 million. Waller Creek is a joint venture established to acquire a parcel of land in Texas and develop, manage, operate, and eventually sell the developed property. Waller Creek closed on the $126.0 million acquisition of land in December 2018. During 2019, the Company acquired an additional 2.5% interest in Waller Creek, through WeWork Waller Creek, for $3.3 million. (5) During 2018, the Company launched the Creator Fund that will make investments in recipients of WeWork’s Creator Awards and other investments through use of a venture capital strategy. The Creator Fund is a consolidated subsidiary owned 99.99% by related party noncontrolling interest holders. The Creator Fund has invested in other companies through Simple Agreements for Future Equity (“SAFE”), equity securities, or convertible notes. SAFE investments will convert into equity issued in the subject entity’s next qualifying equity financing round, typically, at either the issue price or a discount to the issue price. The SAFE is also senior to any equity claims upon a change of control and/or dissolution of the subject entity prior to the conversion of the security. As the Creator Fund does not have significant influence over these investees and the investments do not have a readily determinable fair value, these investments are recognized at the initial cost basis, subject to impairment and remeasured using the measurement alternative. Under the measurement alternative, changes in fair value are recognized in connection with orderly market transactions. During the six months ended June 30, 2018 and 2019, the Creator Fund made investments totaling $3.2 million and $13.7 million respectively. (6) In 2016, the Company entered into an agreement with WeWork India Services Private Limited (“IndiaCo”), an affiliate of Embassy Property Developments Private Limited (“Embassy”), to subscribe for convertible debentures to be issued by IndiaCo in an aggregate principal amount of INR, which equated to $5.5 million as of June 30, 2019. The Company fully funded this investment in April 2017. The debentures will earn interest at a coupon rate of 6% per annum and have a maximum term of twenty years. The Company also has a buy-out option that it may exercise to purchase Embassy’s equity shares in IndiaCo, at fair value, after June 30, 2021 or earlier upon the occurrence of certain triggering events. The debentures are convertible into equity shares of IndiaCo upon certain trigger events which include: (i) changes in control, and (ii) defaults in regards to certain agreed upon provisions. IndiaCo will construct and operate workspace locations in India using WeWork’s branding, advice, and sales model. Per the terms of the agreement, the Company will also receive a management fee from IndiaCo based on an agreed upon profit allocation. The Company earned $1.6 million and $3.5 million, in management fee income from IndiaCo during the six months ended June 30, 2018 and 2019, respectively. Management fee income is included within service revenue as a component of total revenue in the accompanying condensed consolidated statements of operations. (7) During 2019, the Company formed a new global real estate acquisition and management platform (“ARK”) and ARK sponsored the “ARK Master Fund”. ARK secured from a third-party investor $500 million in limited partner capital commitments to the ARK Master Fund and an additional $500 million in capital commitments to related future real estate ventures that ARK expects to form in the future (“Additional ARK Funds”). As of June 30, 2019, the Company has committed $12.5 million to the ARK Master Fund, which amount may increase (up to a maximum aggregate amount of $25.0 million) in proportion to additional third-party capital commitments secured by the ARK Master Fund. Of the total capital commitments, the Company had funded approximately $0.7 million as of June 30, 2019. The ARK Master Fund and the Additional ARK Funds will pursue real estate and real estate-related investments that we expect would benefit from the Company’s occupancy or involvement or the involvement of the limited partners of the ARK Master Fund or the Additional ARK Funds, either on a global basis or, in the case of the Additional ARK Funds, pursuant to more-targeted investment mandates. During the six months ended June 30, 2019, the ARK Master Fund closed on the acquisition of a commercial real estate building in which the Company was the only tenant in the building upon its acquisition by the ARK Master Fund, pursuant to a lease agreement that commenced originally in January 2018. The Company’s lease was not amended subsequent to the acquisition, see Note 22 for additional details. As of June 30, 2019, the WPI Fund, The Wing, IndiaCo, ARK Master Fund and certain other entities in which the Company has invested are unconsolidated VIEs. In all cases, the Company is not the primary beneficiary, as the Company does not have both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and exposure to benefits or losses that that could potentially be significant to the VIE. None of the debt held by these investments is recourse to the Company. The Company’s maximum loss is limited to the amount of our net investment in these VIEs and any unfunded commitments as discussed below. During the six months ended June 30, 2018 and 2019, the Company recorded approximately $0.9 million and $(2.6) million, respectively, for its share of income (loss) related to its equity method and other investments included in income (loss) from equity method and other investments in the condensed consolidated statement of operations. During the six months ended June 30, 2018 and 2019, the Company contributed a total of $58.0 million and $19.7 million, respectively, to its investments and received distributions on sale of its investments totaling $2.2 million for the six months ended June 30, 2018. There were no distributions received during the six months ended June 30, 2019. As of June 30, 2019 the Company had a total of $64.3 million in unfunded capital commitments to its investments; however, if requested, in each case, the Company may elect to contribute additional amounts in the future. F-103