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Surprise: WeWork's CMBS Exposure Still Growing, Reaches $5.6B

WeWork battled extreme turbulence in 2019 after a failed IPO and a flurry of negative headlines, but, to the surprise of some analysts, that didn't stop properties leased by the coworking giant from being used as collateral for billions of dollars worth of securitized mortgages in the last few months.

 

 
WeWork Entrance
An entrance to one of WeWork's locations.

WeWork is now tied to 73 commercial mortgage-backed securities deals valued at $5.58B, according to Trepp Analytics. That is a significant increase from October, when Trepp clocked WeWork's CMBS exposure at $3.8B across 55 deals.

The data analytics provider said it took additional time to discover WeWork's true CMBS exposure because the firm's name often appears on remittance data as a sublessee or an affiliated business entity.

The $5.58B in WeWork-CMBS exposure jarred Trepp analysts, who predicted the company's recent troubles would impact its ties to CMBS debt, particularly newer issuances. 

"In the lending landscape for CMBS, we believed that investor pushback would result in loans with WeWork tenant roll exposure to be squeezed out from the collateral pools altogether," Trepp analysts Catherine Liu and Manus Clancy wrote in their latest report. "However, that has not been the case — several CMBS deals over the last few months have included loans for which WeWork is a tenant."

In fact, WeWork's exposure to CMBS debt increased dramatically heading into 2020. About $1.76B in new CMBS debt tied to 15 deals closed in just the past four months, with WeWork listed as a top 5 tenant in those deals, Clancy and Liu reported.

Some of those recent issuances include a $408.2M loan tied to the Wilshire Courtyard in Los Angeles, a $525M loan linked to Midtown Center in Washington, D.C., and a $150M CMBS loan tied to Sunset North in Bellevue, Washington, Trepp said. 

About 13% of the WeWork-exposed CMBS loans are on servicer watchlists, Trepp said.