Twitter has stopped paying rent on its San Francisco headquarters and other offices as part of an ongoing cost-cutting campaign under new owner Elon Musk, company insiders told the New York TImes.
The rent stoppage could be a tactic to push owners to rework the company’s long-term leases now that Musk has laid off 50 percent of its workforce and the company does not need as much space. According to the Times, which cited numerous anonymous sources from within the company, Musk’s team hopes to renegotiate its leases.
The report indicated that Twitter might also renege on severance packages for laid-off workers, many of whom are located in the Bay Area.
Musk did not reply to the Times’ request for comment. Nor did the manager and part-owner of its San Francisco headquarters, Shorenstein Properties, which is currently in the midst of a drawn-out process to refinance a $400 million loan on the buildings, where Twitter leases three-quarters of the space and some of its contracts don’t expire until 2028. The Times said Twitter has received complaints from Shorenstein about nonpayment, and gotten similar notices from its other office owners and managers around the world.
The until-now stable Twitter rents are a large part of what Shorenstein had to offer special servicers on the loan while it tries to negotiate an extension past Jan. 9, according to Trepp Senior Managing Director Manus Clancy.
“As long as Twitter is in there and paying their leases, this thing is profitable,” he told TRD before news of the nonpayment became known. “My guess is that the owners go back and say, ‘Look, this building is cash flow positive, if you give us two or three more years we can do things to replace these tenants down the road.’”
The Times piece also says Musk is debating whether or not to pay the severance packages promised to laid off workers, many of whom live in the Bay Area. And he has instructed his team to take a hard look at reimbursements to former employees.
In anticipation of the legal challenges that will certainly come if the company reneges on its responsibilities, Musk has been shaking up his legal team, the Times said. He fired Twitter’s chief legal officer and general counsel “for cause” shortly after closing the deal to buy the social media company in October. More recently, he fired his personal lawyer, Alex Spiro, whom he brought in only months ago to take charge of the company’s legal team. Many other lawyers were also laid off, so Musk has brought in some from his other companies, particularly SpaceX.
— Emily Landes
Read more
Commercial
San Francisco
Twitter building faces deadline on $400M refinance
Residential
San Francisco
Tech layoffs could bring an early close to 2022 SF residential market
Commercial
San Francisco
Despite tech layoffs, employees stay away from the office