WeWork Discloses Another 9-Figure Loss, Reworks Deals With 4 Landlords
As WeWork approaches the five-month mark since its Chapter 11 bankruptcy filing, the beleaguered coworking firm has continued to burn through cash and make scant progress on shrinking its footprint.
In new filings in its bankruptcy case over the weekend, WeWork revealed it has reached deals with landlords to hold on to four more of its locations with reduced rents and moved to reject a Salt Lake City lease. It also disclosed February financial statements covering its U.S. and Canada operations, revealing another $122M in monthly losses.
The latest shuffling of leases brings WeWork’s total, pending the approval of the latest motions, to 25 leases assumed and 94 rejected. The coworking firm had a combined 292 locations in the U.S. and Canada when it filed for bankruptcy in November. The future of around 173 WeWork locations in North America remains under negotiation.
WeWork's financial disclosure showed the company took in $83.8M in revenue for the month while spending $197.8M. Its losses narrowed from January, when it reported a $153.7M loss. Its cash dwindled from $113.3M at the end of January to $89.6M at the end of February, according to the filings.
“WeWork is confident in our ability to successfully navigate the Chapter 11 process and emerge a financially strong and sustainable company,” a WeWork spokesperson wrote in an email.
The buildings WeWork is looking to keep span the East Coast, from 1 University Ave. in Toronto to 110 Corcoran St. in Durham, North Carolina. It will also stay at 200 Massachusetts Ave. NW in Washington, D.C., and in the Colony Square property at 1175 Peachtree St. in Atlanta.
WeWork will pay reduced rents and shrink its footprint at all but the Toronto location as part of its deals, court filings indicate. It has also agreed to a shortened lease term in D.C. at the Capitol Crossing office complex, where it signed a 111K SF lease in 2019.
In Canada, the coworking firm will have reduced parking. Cure amounts to be paid at a later date to satisfy the new contracts total $1.1M, $649K of which is owed to 200 Massachusetts landlord Property Group Partners.
WeWork is looking to reject its lease of the top floor of the 250 Tower in Downtown Salt Lake City, a 16-story office tower owned by Seattle-based Unico Properties. The company indicated in court filings that it would exit the property on March 30.
“We’re steadily approaching a portfolio of locations poised for long-term success and look forward to continuing this momentum,” the spokesperson said.
Operating expenses at its U.S. and Canadian locations totaled $84.8M in February, while the next-largest cost was $59M in impairment expenses. That line item includes write-downs on previously completed build-outs and other property investments where the costs had been spread over the term of a lease but are now being realized in full, the WeWork spokesperson said.
In early March, WeWork asked for a 120-day extension from the U.S. Bankruptcy Court for the District of New Jersey to maintain control of its Chapter 11 case and prevent competitors from filing competing restructuring proposals, Bloomberg Law reported.
The company is deciding whether to renegotiate or reject the remaining leases in its portfolio while it faces a $500M, venture-backed takeover bid from Adam Neumann, WeWork’s former CEO who was ousted after a failed initial public offering exposed financial mismanagement at the firm.
Court filings from March 26 indicate that lawyers for Flow, Neumann’s new real estate venture focused on apartments, are looking to elbow their way into the courtroom after WeWork has reportedly rebuffed or ignored buyout offers from the firm.
Other recent court filings from landlords indicate that WeWork has been withholding rent as it negotiates new lease terms, with the firm’s spokesperson saying it is leveraging every tool at its disposal to secure agreeable lease terms.
The most recent in a string of motions to compel rent payments comes from a March 28 filing from lawyers for New York-based Trinity Hudson Holdings. The lawyers are asking the court to compel WeWork to pay $164K for a missed March rental payment at its 160 Varick St. location in New York, along with an additional $164K rent payment that they assumed would be missed Monday.
Trinity Hudson’s filing is one of more than a half-dozen similar motions put before the court in the last several weeks.
The motions to compel payment are scheduled to be heard at the case’s next hearing on April 18, a proceeding that was rescheduled from late last month and is set to address a swath of issues related to the firm’s bankruptcy.
“We are extremely grateful to our landlords for their constructive engagement and remain committed to finding mutually beneficial solutions that are better aligned with today’s market conditions and that will enable us to successfully move forward in our restructuring process,” WeWork's spokesperson said.
