Landlords Call WeWork Lease Renegotiation Talks 'Opaque And Antagonistic'

Just over a month after WeWork filed for bankruptcy, the embattled coworking giant's landlords are expressing frustration with how it has tried to renegotiate hundreds of leases across the country.

The tone from WeWork and its restructuring team during lease talks “has been opaque and antagonistic,” attorneys for a group of landlords wrote in a court filing Sunday.

Though attorneys for real estate giants like Starwood, Brookfield and Boston Properties filed objections to WeWork's proposed bankruptcy financing plan last week, the official committee of unsecured creditors formed for the Chapter 11 process consented to an amended plan that was approved by a bankruptcy judge Monday.

The approved financing allows the nearly $700M in outstanding letters of credit tied to WeWork leases to be renewed, according to court filings. U.S. Bankruptcy Judge John Sherwood's order prevents landlords from drawing on those letters of credit en masse at the end of this month — as they would have likely been able to do had WeWork defaulted, the company said — and grants WeWork's creditors, led by SoftBank, certain liens against WeWork's leases.

“We are pleased with the court’s approval of the debtor-in-possession (DIP) financing facility on a fully consensual basis,” a WeWork spokesperson told Bisnow in a statement. “The DIP will enable WeWork to continue its long standing letter of credit program in the ordinary course. This is an important step forward in our cases and is another sign of the continued strong support of our lenders and key financial partners.”

In their statement supporting the amended debtor-in-possession financing plan, attorneys for the unsecured creditor committee — which includes representatives from Nuveen, Beacon Capital Partners, Carr Properties and Hudson Pacific Properties — still raised concerns about the proposal but acknowledged there were no better options on the table.

The committee, represented by Paul Hastings bankruptcy attorneys, wrote that WeWork's hundreds of landlords “still face uncertainty and risks that need to be monitored and addressed.”

The committee's role in the proceeding is to ensure a successful reorganization of WeWork while driving a fair negotiating process and secure recovery for landlords, it wrote in the statement.

That negotiating process is paramount as WeWork hopes to slash its annual rent payments by more than $500M. It has said it is looking to renegotiate its terms at more than 400 locations.

But those talks have been difficult, the committee's filing indicates.

“[WeWork's] own business plan shows the need for significant lease concessions to be achieved in short order,” the statement says. “To date, however, landlords have reported to the Committee that the tone and structure of the lease negotiation process has been opaque and antagonistic, which will not lead to a fruitful outcome.”

Paul Hastings attorneys didn't respond to Bisnow's requests for comment.

Some negotiations are nevertheless bearing fruit. WeWork disclosed in a Monday filing that it struck a deal to reduce its rent and shorten its lease at 1440 Broadway, where Amazon leases more than two-thirds of the enterprise-oriented space. Bloomberg first reported the deal.

“This agreement generates long-term, sustainable value of an iconic New York City building,” WeWork's spokesperson said in a statement. “WeWork will continue to operate 10 floors consisting of 300,000 square feet. We look forward to continuing to deliver an exceptional member experience in the building for many years to come.”

It is not entirely clear who WeWork struck the deal with. The building's owners, CIM Group and Australian fund QSuper, were expected to hand over the building's deed to the special servicer of a $399M CMBS loan tied to 1440 Broadway, according to commentary from October.

WeWork's lease for more than 40% of the building's rentable space was cited as a challenge in refinancing the loan. A CIM spokesperson declined to comment to Bloomberg.

WeWork's spokesperson said the 1440 Broadway deal is an example of the company's renegotiation process, describing it as amicable when possible. It is still just one of the 292 U.S. and Canada locations WeWork said it was operating as of October, and the coworking company is looking to find new deals on nearly all of them.

When WeWork filed for bankruptcy Nov. 6, it reported $19B in liabilities and $15B in assets. Its initial filings indicated that its available cash is expected to dwindle to $45M by Feb. 4, a month before the company hopes to emerge from bankruptcy.

That thin margin for error was raised by the unsecured creditor committee in its statement as a reason for WeWork to be more transparent in negotiations. It said it expects WeWork “to host regular and direct meetings with the Committee and its members” regarding its business plan, lease renegotiations, asset sales and exit capital, as well as providing regular updates.

“For its part, the Committee will facilitate regular, more communal meetings with the lessor community to help forge the kind of relationships that will be critical to achieving the goal of a healthy, reorganized WeWork,” the filing says.

WeWork's spokesperson declined to comment on the committee's statement.