WeWork cuts deals to retain coworking offices in SF and Oakland

Bankrupt firm will assume 145,000 square feet in two towers, at reduced lease rates

WeWork's David Tolley; 201 Spear Street, 1111 Broadway (Getty, WeWork, 201spear, oaklandcitycenter)
WeWork's David Tolley; 201 Spear Street, 1111 Broadway (Getty, WeWork, 201spear, oaklandcitycenter)

WeWork has cut deals with two landlords in San Francisco and Oakland, agreeing to keep two offices containing 145,000 square feet at reduced rents.

The bankrupt coworking firm based in New York assumed two office leases at 201 Spear Street in San Francisco and 1111 Broadway in Oakland, the San Francisco Business Times reported.

The deals join five other Bay Area leases the company intends to keep as it works through a Chapter 11 reorganization. The assumptions are subject to final approval by the U.S. Bankruptcy Court for the District of New Jersey.

In November, WeWork announced it would vacate 80 coworking offices in the U.S. and Canada, including at least seven of its Downtown San Francisco leases containing 400,000 square feet.

Late last month, the company said it would shed $4 billion in debt and get $450 million in new financing to get out of bankruptcy without being sold to its co-founder and former CEO Adam Neumann, the architect of its spectacular rise and fall.

The renegotiated leases in San Francisco include 65,000 square feet in the 18-story office tower at 201 Spear Street, owned by locally based Strada Investment Group.

The agreement would reduce rent and partially convert the agreement to a gross lease. A “cure amount” of $550,570 will come due at an unspecified date. The company’s original footprint, and financial terms of the deal, were not disclosed.

The doubt hovering over the WeWork lease helped convince Newport Beach-based KBS Realty Advisors to default on its $125 million mortgage loan, which was bought in January by Strada for half price. The all-cash deal worked out to $266 per square foot.

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WeWork said it planned to further invest in the property, refurbishing and then reopening floors 5 and 6 for private offices and All Access members.

The Oakland leases include 80,000 square feet in the 24-story office tower at 1111 Broadway, owned by San Francisco-based Swift Real Estate Partners.

That deal will extend the lease, reduce the footprint and rent and convert to a gross lease, according to the assumption filing. Terms of the agreement were not disclosed.

Besides the two San Francisco and Oakland leases, WeWork has filed motions in bankruptcy court to keep 70,000 square feet of coworking offices at 2201 Broadway, in Oakland; and more than 100,000 square feet of offices at 600 California Street in San Francisco, according to the Business Times.

The firm also seeks to keep 85,000 square feet of offices at 3001 Bishop Drive in San Ramon; 79,000 square feet at 333 West San Carlos Street in San Jose; and 20,000 square feet at 1 Belvedere Place in Mill Valley.

Five active WeWork offices in San Francisco have not yet been assumed or rejected, including 535 Mission Street, 44 Montgomery, 650 California Street, Salesforce Tower and Two Embarcadero Center, according to its website.

— Dana Bartholomew

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