WeWork’s rental woes slam CMBS market

As many of its members request rent relief, the office-space giant has been skipping or renegotiating rent payments

National /
May.May 11, 2020 08:45 AM
A Wework location in Beijing on May 6, 2020 (Credit: Wang Zhao/AFP via Getty Images)

A Wework location in Beijing on May 6, 2020 (Credit: Wang Zhao/AFP via Getty Images)

WeWork’s efforts to renegotiate several of its leases and skip rent payments is causing the price of bonds backed by payments from the company to plummet.

Many WeWork tenants have requested rent relief or the termination of their contracts since the onset of the coronavirus pandemic, which has hurt the commercial mortgage-backed securities that rely on rent from WeWork to pay investors, according to the Financial Times.

Overall, about $5.5 billion worth of CMBS deals include properties that count WeWork as a tenant, according to data from Trepp. These include some of the company’s flagship locations in New York and San Francisco. A $240 million loan backed by a WeWork location in San Francisco is now trading at 73 cents on the dollar, down from 100 cents in March.

With a short-term lease model, WeWork is more at risk of increasing vacancies than standard office buildings. This puts more pressure on WeWork itself to keep up with rental payments — and even when lockdown measures are rolled back, whether or not WeWork’s tenants will return remains unclear.

Some tenants have complained that it has been extremely difficult to cancel their WeWork lease or freeze their rent payments, and the company’s efforts to keep its locations open during the pandemic have been controversial. A group of WeWork members is threatening to sue the company if it continues to collect fees from them despite the pandemic preventing them from using their space.

Michelle Orman, a WeWork tenant in Brooklyn, said to the Financial Times that she is not going to renew her lease after May and had tried to cancel it sooner. She has “no intention of going back to [WeWork] after this experience.”

“I can’t support a business that turns its back on entrepreneurs and small businesses,” she said. [FT] – Eddie Small


Related Articles

arrow_forward_ios
Wendy Silverstein (Credit: Getty Images)

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
WeWork CEO Adam Neumann (Credit: Getty Images and iStock)

WeWork’s side businesses are fizzling

WeWork’s side businesses are fizzling
Sarah Pontius (Credit: Union College)

Another head rolls at WeWork

Another head rolls at WeWork
From top: Park Place Mall in Tucson, AZ with Brookfield Property Partners CEO Brian Kingston; Westfield Countryside in Clearwater, FL with Unibail-Rodamco-Westfield CEO Christophe Cuvillier; and The Mall at Tuttle Crossing in Dublin, OH with Simon Property Group CEO David Simon (Google Maps, Westfield, Simon, Getty)

These are the biggest malls landlords ready to hand over to CMBS lenders

These are the biggest malls landlords ready to hand over to CMBS lenders
Hotels in trouble: the Hilton Houston Post Oak (left) saw its value cut in half and is in foreclosure, and the Residence Inn Arlington Pentagon City is set to be torn down and turned into part of Amazon’s HQ2. (Photos via Hilton; Marriott; iStock)

Here are the markets where hotels are hurting the most

Here are the markets where hotels are hurting the most
WeWork CEO Sandeep Mathrani (Getty)

WeWork losses continue but firm sees glimmer of hope

WeWork losses continue but firm sees glimmer of hope
Hotel Association of New York City CEO Vijay Dandapani and Hilton Times Square (Getty)

80% of NYC hotels backing CMBS loans show signs of distress

80% of NYC hotels backing CMBS loans show signs of distress
From left: The Hotel, Trump International Hotel and Hilton Times Square (Google Maps, Hilton)

New York City hotels put strain on $3.1B in CMBS loans

New York City hotels put strain on $3.1B in CMBS loans
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...