IWG Threatening Landlords With Bankruptcy Unless Given Rent Cuts: REPORT
Coworking giant IWG, which runs the Regus brand across the globe, is threatening to dump even more of its leases into bankruptcy unless landlords reduce rents.
IWG is set to declare its U.K.-based Regus subsidiary insolvent “in a matter of days,” erasing over $1B in lease guarantees in its 500 global locations, The Sunday Times reported. The company already has tossed a number of individual leases into U.S. bankruptcy courts over the past month, including locations in Atlanta, Chicago, Miami, Austin, New York and Washington, D.C.
The Royal Court of Jersey gave IWG a green light to place its Regus business into insolvency, The Times reported. Meanwhile, IWG told landlords it will be seeking rent reduction on its properties.
Though coworking seems to be surviving its first major economic downturn, it has not escaped the pain of the coronavirus pandemic. The typical model has a coworking operation entering into a long-term lease with a landlord. In turn, the coworking operator enters into shorter-term leases with tenants to populate its space. Those shorter, more flexible, leases are easier to cancel or not renew when times turn tough.
IWG reported a more than $300M loss during the first half of 2020.
“Whilst the COVID-19 pandemic continues, we expect our third quarter to be particularly challenging,” IWG CEO Mark Dixon said in an earnings press release in August. “We, therefore, remain sharply focused on maximizing further cost savings in the coming months to build on the [$229M] of cash savings achieved through the extensive actions already taken.”
Tensions between IWG and its tenants have been bubbling in recent months. In April, some 300 IWG tenants signed a petition asking the company to close locations and freeze rents during the pandemic, Business Matters reported. This wouldn’t be the first time Regus has fallen into bankruptcy. In 2003, Dixon put Regus' U.S. arm into Chapter 11 bankruptcy.