WeWork is closing its corporate headquarters and one of its largest locations as it approaches the endgame of its bankruptcy proceedings.
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WeWork occupies more than 300K SF across 20 floors at Tower 49 in Midtown Manhattan, owned by Kato International. Besides its corporate headquarters, the building at 12 E. 49th St. has a coworking space with 2,800 members, according to a Friday filing by the company.
In a Monday filing in WeWork's Chapter 11 bankruptcy case, the company's attorneys notified the court it intends to reject the lease — one of the largest in the company's portfolio — on May 31.
“Our intention is to stay in as many buildings as possible under economic terms that position all parties for a sustainable future. Unfortunately, after extensive conversations, we have been unable to reach a deal regarding our operations at Tower 49 that would enable us to successfully operate the building for the long term,” a spokesperson for WeWork said in a statement. “We therefore have made the very hard decision to end our operations at Tower 49 in late May.”
The scale of the lease means WeWork will try to retain and relocate thousands of paying customers, on whom its survival depends.
“We will be reaching out to members this week to find alternative solutions and we deeply apologize for any inconvenience this may cause,” WeWork's spokesperson said.
WeWork became a tenant in Tower 49 in July 2016 when it initially entered into a lease for 10 floors totaling 159K SF. It has since grown to occupy more than 300K SF, according to court records, half of the building's rentable space.
Neither an attorney for Kato International nor a leasing agent for the building immediately responded to requests for comment.
At a bankruptcy hearing Monday morning, Kato attorney Jack Rose said all of the landlord's objections to WeWork's bankruptcy were resolved with the lease rejection.
“While we regret that we will not be working with WeWork in the future, we have been able to resolve the issues with the company to our satisfaction,” Rose said.
Kirkland & Ellis partner Steven Serajeddini, one of the bankruptcy attorneys representing WeWork, called the rejection of the Tower 49 lease a “tough decision.”
When Judge John Sherwood asked if the closing of the headquarters would cause problems for the firm as it emerges from bankruptcy, Serajeddini said, “The company believes they can manage through it.”
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