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WeWork Sued For Breach Of Contract Over Continuous Construction

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WeWork Sued For Breach Of Contract Over Continuous Construction
A WeWork location in Downtown San Francisco

One of WeWork's San Francisco landlords is suing the beleaguered coworking company for breach of contract, alleging it repeatedly violated its lease agreement with noisy tenant-improvement construction during business hours.

300 Prospect Properties Inc., a subsidiary of landlord Brothers International, which owns 180 Sansome St., filed the lawsuit in San Francisco County Superior Court late last month. It claims WeWork has frequently engaged in construction activities like core drilling during business hours, despite the work being forbidden during that time per its lease agreement. 

WeWork signed the lease for 78K SF across 13 floors in November, announcing 180 Sansome as the company's newest HQ by WeWork, a flex workspace offering targeting midsized companies. Though WeWork expected members to move in by June, it ended up only beginning tenant improvement work in May, according to last month's court filing. WeWork declined to comment.

Brothers International claims that it was notified by two of the building's other tenants, Climate Policy Initiative and a French private school, INSEEC, of loud construction noises during the day, and that it confirmed the reports through firsthand investigation.

CPI, the 10th-floor tenant, allegedly filed the first complaint against WeWork, whose 13 floors include floors nine and 11. The think tank complained of drilling and hammering starting in mid-May, which Brothers International confirmed through observation in the following weeks, it stated in the suit.

INSEEC, the eighth-floor tenant, followed with noise complaints of its own in August soon after it returned from its summer break and neared the new school year, Brothers International claims. The noise continued through September and "interfered with INSEEC's ability to conduct classes," the suit states.  

CPI and INSEEC's August and September complaints followed WeWork writing a letter in early August, promising to reschedule the loud work for evenings and weekends, Brothers International claims. WeWork had yet to respond to complaints of it continuing nonetheless as of the lawsuit's filing Sept. 24. 

The lawsuit is only the latest of a series of issues for WeWork, beginning with its disastrous attempt at an initial public offering this year. The company is now slowing its leasing pace because of $47B of lease obligations. Last week, it agreed to a takeover by SoftBank, its biggest investor, at a valuation of roughly $8B, slightly more than one-sixth of how much SoftBank valued it at earlier this year.

WeWork's rent is $73 per SF in the first year of its 10-year lease at 180 Sansome, with it gradually scheduled to increase to $95.25, according to a copy of its lease agreement included in the lawsuit. The company's tenant improvement allowance is $60 per SF. 

Brothers International is seeking an injunction to prevent WeWork from continuing the daytime construction, along with unspecified punitive damages. It didn't respond to a request for comment. 

Jarred Schenke contributed to this report.

Related Topics: WeWork