WeWork plans to renegotiate practically all of its leases, after warning about its future

NEW YORK — WeWork stated Wednesday it’ll try to renegotiate practically all of its leases and should exit some properties, an announcement coming simply weeks after the workspace-sharing firm sounded the alarm over its potential to stay in enterprise.

The New York Metropolis firm should cut back its working prices — notably its present lease liabilities, which “stay too excessive and are dramatically out of step with present market circumstances,” WeWork Interim CEO David Tolley stated in a press release revealed on the corporate’s web site.

WeWork’s lease liabilities accounted for greater than two-thirds of its working bills for the second quarter of this 12 months, Tolley stated. As of June 30, WeWork had 777 places in 39 nations. It has 9 places in Chicago, based on its web site.

“We’ll search to barter phrases with our landlords that enable WeWork to take care of our unmatched high quality of service and international community, in a financially sustainable method,” Tolley wrote — including that the corporate expects to exit “unfit and underperforming places” as a part of these negotiations.

Final month, hypothesis round WeWork’s future and a possible chapter submitting heightened after the corporate warned there was “substantial doubt” about its potential to proceed as a going concern — which means it won’t have the sources wanted to function and keep in enterprise. WeWork pointed to rising member churn and different monetary losses, noting that its potential to remain in operation could be contingent upon enhancing its liquidity and profitability over the subsequent 12 months.

“Amongst my shoppers which have WeWork as a tenant, there’s clearly general concern about its viability and a priority for them submitting for Chapter 11 (chapter safety),” stated Jonathan Adelsberg, a senior companion and co-chair of the Actual Property Division at New York legislation agency Herrick, Feinstein LLP. He added that upcoming renegotiations will likely be sophisticated as a result of every of WeWork’s lease agreements are totally different.

Whereas a chapter restructuring won’t result in large-scale WeWork location closures, Adelsberg and others notice that there’s been concern about WeWork’s viability in a lot of buildings for years.

The shuttering of choose WeWork places isn’t new — simply final fall, the corporate introduced plans to exit 40 underperforming U.S. places. And over latest years, WeWork has stopped paying hire or exited lease agreements early for a handful of places nationwide, based on credit standing and analysis agency Morningstar Credit score.

WeWork’s plans to renegotiate most of its leases additionally arrive at a time when demand for workplace house is weak general. The COVID-19 pandemic led to rising vacancies in business actual property — with many People nonetheless spending at the least a part of the week working from residence. Main U.S. markets struggling to enhance workplace house occupancy embrace San Francisco, New York, Chicago and Washington, D.C.

WeWork went public in October 2021 after its first try to take action two years earlier collapsed spectacularly, resulting in the ousting of its CEO and founder, Adam Neumann. The corporate was valued at $47 billion at one level, earlier than traders began to drop off as a result of Neumann’s erratic habits and exorbitant spending. It’s nonetheless coping with the fallout of its preliminary aggressive growth.

However Tolley nonetheless sounded an optimistic notice Wednesday — stating that “WeWork is right here to remain” and develop in “to satisfy evolving office wants far into the long run.”