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WeWork’s arrears trigger office owner tears

Firm quit paying rent on 315 West 36th Street, driving default

Walter & Samuels' David Berley with 315 West 36th Street
Walter & Samuels' David Berley with 315 West 36th Street (Walter & Samuels, Getty, Google Maps)

As WeWork labors to dig itself out of debt, the co-working firm is letting leases go to seed, leaving its landlords facing delinquency and default.

WeWork quit paying rent at 315 West 36th Street, Morningstar commentary shows, sapping revenue at the Garment District office building and driving its owner to default on debt payments last month. 

David Berley, chair of Walter & Samuels, nabbed full ownership of the building in 2015, buying out SL Green’s partial stake a few months after WeWork had inked a lease for 93 percent of the building’s total square footage.

At the time, Berley said he expected the neighborhood would “realize significant rent growth in the future.” 

In 2018, Berley refinanced the debt on 315 West 36th Street with a $77 million loan set to mature a few years before WeWork’s lease was up. 

But in the past seven months, the co-working firm stopped making rent payments, Morningstar data signals, wiping out the overwhelming majority of Berley’s net cash flow.

In April, the owner fell delinquent on monthly debt payments and has failed to make a payment since. The loan transferred to special servicing in June for payment default, according to Morningstar. 

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WeWork told its landlord it will not re-lease the space it has vacated, servicer commentary notes. Neither Walter & Samuels nor WeWork immediately responded to requests for comment.

WeWork has been causing landlords grief from coast to coast.

The firm backed out of 75,000 square feet of coworking space at Irvine, California’s Lakeshore Towers in May. WeWork was the property’s second largest tenant with 8 percent of the building’s leasable area.

Owner General Electric Pension Trust subsequently failed to make monthly interest payments in June and July on the building’s $195 million loan, according to Morningstar. 

The $70 million loan on APF Properties’ 25 West 45th Street in Midtown Manhattan fell into troubled territory in June after WeWork seemingly ditched its office space, the building’s largest lease. Servicer commentary noted occupancy declines had taken a whack to revenue. 

The same month, an entity tied to former WeWork CEO Adam Neumann defaulted on a $31 million backed by a San Jose office property. The building was just 1 percent occupied in January and reported net cash flow of $245,000 in the red. 

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DistressGarment DistrictMidtown ManhattanOffice MarketWeWork