WeWork is beginning to renegotiate almost all of its leases and preparing to leave “unfit and underperforming locations,” the beleaguered coworking giant announced on Wednesday.
The company will reduce its lease liabilities, which accounted for over two-thirds of total operating expenses in the second quarter, CEO David Tolley said in a statement. However, WeWork is still planning to stay in a majority of its buildings and markets, he said, adding it would let members know about closures and offer alternatives to minimize disruptions.
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“We are taking immediate action to permanently fix our inflexible and high-cost lease portfolio to achieve the sustainable operating model that we need to serve our members for many years to come,” Tolley said in the statement. “By addressing this reality now, we will be able to continue investing in and innovating our business on behalf of our members.”
The decision to renegotiate leases comes after WeWork revealed there was “substantial doubt” about its ability to stay in business in its quarterly earnings release last month. The company attributed the struggles to losses, projected cash needs, increased member churn and its liquidity levels amid an anemic office market.
The company had a net loss of $397M in Q2, up from a net loss of $299M the previous quarter, per the earnings report. That said, the company modestly stemmed the bleeding from Q2 2022, when it reported a net loss of $635M.
WeWork lost 15,000 physical memberships in its consolidated portfolio over the three months ending June 30, closing the period with 512,000 members. The portfolio included 610 locations across 33 countries as of June, down from 617 locations three months earlier.
The company has seen an Icarus-like fall from its 2019 peak, when it was valued by SoftBank at $47B. As of early Wednesday afternoon, its market capitalization was less than $200M and its stock price hit a 52-week low, per CNBC.
With the latest move to renegotiate leases, WeWork hopes to refocus its business strategy on reinvesting in its strongest assets and continuing to improve its product, Tolley said.
“WeWork is here to stay,” Tolley said in the statement. “As companies of all sizes seek flexibility in where and how their employees come to work, this initiative best enables us to continue to invest in our products, services, and member experiences to meet evolving workplace needs far into the future.”
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