Table of Contents WEWORK COMPANIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2019 (UNAUDITED) During the year ended December 31, 2018 and the six months ended June 30, 2019, there were no unrealized gains or (losses) relating to Level 3 assets held as of December 31, 2018 and June 30, 2019, respectively. The Company does not intend to sell its investments in available-for-sale convertible notes and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. During the year ended December 31, 2018, there were unrealized losses of $97.6 million included in interest expense and $76.4 million of unrealized losses included in growth and new market development expenses relating to Level 3 liabilities held as of December 31, 2018. During the six months ended June 30, 2019, there were unrealized gains of $25.3 million included as a reduction in interest expense, $44.1 million of unrealized gains included as reduction in growth and new market development expenses, and $(126.7) million of unrealized loss included in gain (loss) from change in fair value of financial instruments relating to Level 3 liabilities held as of June 30, 2019. The estimated fair value of the Company’s accounts receivable, accounts payable, and accrued expenses approximate their carrying values due to their short maturity periods. As of June 30, 2019, the estimated fair value of the Company’s Senior Notes, excluding unamortized debt issuance costs, was approximately $660.4 million based on recent trading activity. For the remainder of the Company’s long-term debt, the carrying value approximated the fair value as of June 30, 2019. Note 16. Location Operating Expenses Location operating expenses relate to locations that are open for member operations. The components of location operating expenses are as follows: Six Months Ended June 30, (Amounts in thousands) 2018 2019 Real estate operating lease cost (see Note 4) $416,016 $ 835,800 Employee compensation and benefits (excluding stock-based compensation) 80,794 148,825 Stock-based compensation 6,420 25,953 Other location operating expenses 132,738 222,363 Total location operating expenses $635,968 $1,232,941 Other location operating expenses primarily include office expenses, utilities, cleaning, consumables, repairs and maintenance, and safety and security expenses. Note 17. Pre-opening Location Expenses Pre-opening location expenses consist of expenses incurred before a location opens for member operations. The components of pre-opening location expenses are as follows: Six Months Ended June 30, (Amounts in thousands) 2018 2019 Real estate operating lease cost (see Note 4) $153,291 $245,437 Other pre-opening location expenses 3,692 9,696 Total pre-opening location expenses $156,983 $255,133 F-112