Table of Contents WEWORK COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 During the year ended December 31, 2017, other than the $(6.1) million of fair value adjustment there were no unrealized gains or (losses) relating to level 3 assets held as of December 31, 2017. The Company does not intend to sell its investments in available-for-sale convertible notes and it is more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. 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 December 31, 2018, the estimated fair value of the Company’s senior notes, excluding unamortized debt issuance costs, was approximately $623.5 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 December 31, 2018. Note 15. Location Operating Expenses Location operating expenses relate to locations that are open for member operations. The components of location operating expenses are as follows: Year Ended December 31, (Amounts in thousands) 2016 2017 2018 Lease costs: Rent expense (see Note 17) $ 241,588 $ 458,521 $ 851,679 Tenancy costs 41,880 76,194 152,229 Total lease costs 283,468 534,715 1,003,908 Employee compensation and benefits (excluding stock-based compensation) 61,409 102,801 184,171 Stock-based compensation 2,032 18,718 22,793 Other location operating expenses 86,258 158,548 310,257 Total location operating expenses $ 433,167 $ 814,782 $ 1,521,129 Other location operating expenses primarily consist of cleaning, office, consumables, and repairs and maintenance expenses. Note 16. 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: Year Ended December 31, (Amounts in thousands) 2016 2017 2018 Rent expense (see Note 17) $ 103,613 $ 112,851 $ 316,168 Tenancy costs 5,357 11,684 29,402 Other pre-opening location expenses 6,779 6,789 12,261 Total pre-opening location expenses $ 115,749 $ 131,324 $ 357,831 Note 17. Rent Expense Rent expense incurred before a location opens for member operations is recorded in pre-opening location expenses on the accompanying consolidated statements of operations. Once a location opens for member operations, rent expense F-40