Some landlords took issue with WeWork’s bankruptcy plans, adding to the pressure on the co-working company to exit costly leases while maintaining relationships with key owners.
A group of owners filed objections to WeWork’s restructuring plan ahead of a Tuesday deadline, Bloomberg reported. Landlords are unhappy with the company’s timeline and strategy for rejecting leases, which it has up to 210 days to do under Chapter 11 protection.
WeWork said in September it would renegotiate leases weeks before the company filed for bankruptcy in a New Jersey court. The filing triggered WeWork’s ability to cancel dozens of onerous leases across the country, including roughly three dozen in New York alone.
Among those objecting to WeWork’s restructuring plan are Kato International and Walter & Samuels, according to CoStar. Walter & Samuels is one of the New York City landlords with the most exposure to WeWork, which owed roughly $2.6 billion in CMBS debt as of last month, according to an analysis of Trepp data.
The company is walking a “fine line,” CreditSights analyst Evan DuFaux told Bloomberg as canceled leases pose a detriment to office landlords relying on income from WeWork’s occupancy. But WeWork’s potential emergence from bankruptcy would need many of those same landlords to ramp up operations, creating a delicate balance.
The bankruptcy case is “likely to turn on the landlords’ strategy regarding renegotiation and rejection of leases,” DuFaux told the outlet.
WeWork appeared at one point poised to close half of its locations in the United States and Canada, according to regulatory filings. The company has since called the figures “outdated,” telling Bloomberg that “significant progress” has been made with landlords, but didn’t provide updated numbers.
Landlords who aren’t losing WeWork altogether may still be losing significant sums of money. The company’s advisers are asking for widespread rent cuts in negotiations with landlords, sometimes topping out above 25 percent.
Read more
Commercial
New York
WeWork’s NYC landlords owe $2.6B in CMBS debt. Can they repay it?
Commercial
National
Distress Record: WeWork is in ReWork mode
Commercial
National
WeWork tells landlords it intends to renegotiate “nearly all” its leases
There’s also a concern among owners about the collateral guaranteeing their rental income, taking the form of a $1.5 billion letter of credit facility.
Next week, WeWork is set to appear before a judge to request approval for its rules to cancel leases and pay related costs.
The company’s stock increased roughly 16 percent on Tuesday to $1.96 per share, but opened on Wednesday at only $1.50.
— Holden Walter-Warner