WOTSO PROPERTY (WOT)- Transforming Flexible Workspaces: CEO Jessie Glew on Strategic Suburban Expansion, Revenue Milestones, and Innovative Office Solutions in Australia and New Zealand

Discover how Jessie Glew, the innovative CEO of WOTSO Property, transformed the company into a powerhouse in the flexible workspace sector building an impressive network across Australia and New Zealand, achieving a record-breaking $49.7 million in revenue for FY24. Jessie shares the secrets behind the strategic focus on suburban and regional locations and how they balance growth with high occupancy rates amidst the rising demand for flexible leases. Tune in to find out how WOTSO's ancillary services, like virtual offices and meeting room hires, are enhancing their value proposition and opening doors to future opportunities.

We're thrilled to bring you an engaging update on WOTSO Property's current status and future direction. Jessie sheds light on the company's recent expansions and the strategies fueling this growth. Learn how flexible lease options help WOTSO navigate today's volatile financial climate while positioning the company for continued success. With 28 locations, including new expansions in New Zealand, WOTSO is at the forefront of meeting the evolving needs of businesses seeking flexible workspace solutions. Join us for this insightful episode filled with exciting possibilities and innovative approaches to the future of office spaces.

Chapters

• 0:05 Watso Property Growth and Strategy
• 8:01 ASX Briefs Company Update

Transcript

Andrew Musgrave Host

00:05

Welcome back to ASX Briefs, and today we're joined by Jessie Glew, the CEO of WOTSO Property, a company that has made significant strides in the flexible workspace sector, growing its network across Australia and New Zealand and positioning itself as a leader in the commercial property market. Jessie, thanks for joining me today and welcome to the ASX Briefs podcast. 

Jessie Glew Guest

00:26

Thanks, Andrew. 

Andrew Musgrave Host

00:28

Now Jessie, just to start things off, you are a publicly listed company that owns real estate and you say you aren't a REIT,  so what are you? 

Jessie Glew Guest

00:32

Yes, our Chairman announced this at our recent AGM so for those that haven't heard of WOTSO Property, we're a stapled security with an operating business WOTSO stapled to our property trust, WOTSO Property Trust. We have a 300 million dollar real estate portfolio made up of 17 properties across Australia & New Zealand of which our operating business WOTSO occupies 14 of those properties. We no longer see ourselves as being a REIT, we are an operating business supported by real estate.

Andrew Musgrave Host

01:30

Okay, and the company reported a record $49.7 million in revenue for FY24, with a significant portion driven by WOTSO FlexSpace. So, can you talk about the key factors behind this success and how your focus on suburban and regional locations contributed to this growth? 

Jessie Glew Guest

01:48

Sure. So, our revenue is growing, predominantly due to the increase in the number of locations we have, but also that a number of our older locations are reaching maturity and we've been able to grow rates. We've also been fortunate that occupancy across our traditional portfolio so not the workspace business has remained steady at over 95% occupied for the last couple of years. However, with our new locations, these are filling quickly, and we believe it's because we're providing office space locally. 

02:16

The way people work post-COVID has shifted dramatically. Businesses don't need to travel to the CBD to conduct their affairs and we're about providing vertically integrated assets close to where people live. And when we're acquiring assets, we're doing this with the WOTSO operating business front of mind, but then we're adding service around the WOTSO. So, we're often leasing the balance of the building to a cafe, a gym or a childcare centre, and we want to be a one-stop shop for businesses using our buildings. Where we are leasing space for our growing WOTSO operating business in third-party assets, we want to make sure there is service and amenity around that. So, we often find ourselves in shopping centres or in places where there is a high amount of amenity and service. 

Andrew Musgrave Host

03:00

And your FlexSpace network now spans 27 locations, including new sites in New Zealand. So, with FlexSpace revenue growing faster than available desk inventory, how do you balance growth with maintaining high occupancy rates, which are already above 80%? 

Jessie Glew Guest

03:16

Yeah, in fact, we just announced our 28th location, which is the third location in New Zealand, which for us is really exciting, and I think we operate much like a hotel, so when we're full, we're able to lift rates, being mindful that we don't want to be like Foxtel, where when we bring on new members, we bring them in at lower rates than our existing members. So, we've had times where the market has shifted against us, and we've actually had to drop our rates to reflect this. I think this is why it's so important where we are leasing properties off third party landlords so where we're not our own landlord we're doing these on rental agreements based on a low base rent or 45% of turnover, whichever is the greater, and often well. This allows us to weather various different storms, such as COVID competitors opening nearby, and I think it's made us a more sustainable business. 

Andrew Musgrave Host

04:05

Okay, and in today's volatile financial climate, businesses are increasingly seeking flexible lease options. So how has WOTSO adapted to meet these evolving needs, and what trends are you seeing in terms of demand for flexible office spaces? 

Jessie Glew Guest

04:20

Yeah, I think this flows on really nicely from the previous question and I think it's a really simple one. Our operating business only requires businesses to sign for a month, so we offer the ultimate flexibility. Most of our competitors, one, don't own their real estate but, two, they make members sign terms such as six, 12, 24-month terms, which I think reduces a business's capacity to be able to expand and contract and respond to their different environment that's going on around them. I think an example of our growth is that pre-COVID we had revenue of around $16 million. Post-covid, with the same amount of locations, our revenue increased to $21 million and today our FlexSpace business revenue is just over $32 million in turnover. However, I appreciate that has additional locations added to it. 

Andrew Musgrave Host

05:13

And the company has achieved an impressive 25% growth in ancillary services revenue, driven by offerings such as virtual offices and meeting room hire. So, can you elaborate on how those services enhance your value proposition to clients and what future opportunities you see in expanding these services? 

Jessie Glew Guest

05:31

I love this part of our business. It's come as such a surprise to us the revenue that we've been able to build off meeting rooms and virtual offices. Often businesses don't need an office, and they simply just need a place to meet or a registered business address that isn't their home, and we've found the more locations we have, the more this has grown our addressable market to be able to increase that virtual office revenue and meeting room revenue. There are a lot of opportunities, though, for ancillary revenue streams when you start to think about the fact that we are home to over 1,500 businesses and over 6,000 people use our spaces. So, what services do these businesses use and can we get discounts, given the scale, and can WOTSO take a percentage commission of these services along the way? This is something that we really want to explore in the future. 

Andrew Musgrave Host

06:20

Okay, and just to wrap things up, if we look forward, WOTSO has hinted at further expansion in the coming year. So, what else do you have earmarked for the next year, and how do you plan to fund this growth? 

Jessie Glew Guest

06:31

Yeah, so right now. The financial climate is volatile and we're starting to see a lot of opportunity for property acquisition shifting in the right direction for pricing to be appealing for us to acquire, interestingly, given we are looking at areas all across Australia and New Zealand to expand, we often find markets in distress in some areas when they're not in others, and we're able to take advantage of this because we aren't targeting one specific location or market. In terms of our expansion, we're sitting at about 27% geared and we will likely draw down on some more debt on our unencumbered assets to fund further property acquisition, but we won't want to go above about 35% geared. 

07:12

When talking about expanding the WOTSO business, we see a lot of opportunity to grow in third-party properties, as a number of our landlords don't know what to do with their vacant assets. So, we're seeing a lot of suburban and regional real estate where the larger retailers are moving out and they're leaving entire assets vacant. We provide a solution for these landlords and, as long as we can get the right leasing deal, we want to be able to capitalise on these opportunities and this growth will be funded out of our cash flow. Most people are looking to us to grow our distribution as they see WOTSO Property as a traditional REIT. We now see ourselves as a growth stock and we see opportunities for property acquisition and the WOTSO business expansion being the right ones at the moment. That will allow us to target growing that distribution in the future years. 

Andrew Musgrave Host

08:01

Okay, Jessie. Well, it's been great to chat today and get an update on where the company's at, and we look forward to further updates in the upcoming months. 

Jessie Glew Guest

08:08

Thanks, Andrew. 

Andrew Musgrave Host

08:10

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.