Distress Record: WeWork is in ReWork mode
Company looks to rework leases in New York, Chicago, South Florida and California
The Real Deal tracks distressed properties and rounds up our coverage each week in The Distress Record.
It’s perhaps the least surprising Chapter 11 filing in the past 20 years or so, but WeWork’s bankruptcy marks the start of a dark chapter in the company’s tumultuous history.
Once valued by private investors at $47 billion, the co-working giant’s downfall has been characterized by financial mismanagement, questionable dealings by former CEO Adam Neumann and a flawed business model. Ultimately, it led to insolvency.
The past three months have been particularly rough for WeWork.
In August, the company acknowledged “substantial doubt” that it could continue operating. In September it told landlords it intended to renegotiate nearly all of its leases. In October, it skipped $95 million in debt payments and its credit rating was downgraded, crippling its ability to borrow money. On Halloween, the 30-day grace period on the overdue payments expired, but WeWork negotiated for a seven-day extension. Six days later, it filed for bankruptcy.
Now it’s seeking to shed dozens of leases across the US and Canada.
The company wants out of 35 leases in New York, most of them in buildings owned by mid-sized or institutional landlords. Among them are Kushner and RFR’s Dumbo office building and Vanbarton’s Midtown tower.
In the Bay Area, WeWork’s second major hub, the company is looking to break seven leases covering about 440,000 square feet in San Francisco and Oakland.
Los Angeles didn’t fare much better, with the company filing to cancel six leases in the area. South Florida emerged as something of an outlier, as WeWork is not seeking to cancel any of its five offices there.
In Chicago, the company is being sued by its landlord at a LaSalle Street office. Jaime “Jay” Javors is looking to evict the co-working firm, which is $300,000 behind on rent. The building, which is at the center of another unrelated legal drama, would be completely empty if WeWork vacates. The firm has not shared any plans to break the lease.
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