WeWork Files For Bankruptcy
Coworking giant WeWork has filed for Chapter 11 bankruptcy protection, buckling under the weight of lease liabilities and debt interest payments.
WeWork announced the “strategic action” on Monday night.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” WeWork CEO David Tolley said in a release.
The bankruptcy brings to a close the current chapter in one of the most eye-catching real estate rises and falls of recent decades. In 2019, a funding round from principal backer SoftBank valued WeWork at $47B.
The company’s landlords will await the outcome of the bankruptcy to see whether they have been left with vacant space to fill. At the end of December, the coworking provider occupied 44M SF worldwide. That was the last time it provided a figure for total square feet occupied.
WeWork said in a statement issued with its bankruptcy filing that it is requesting the ability to reject existing leases at locations it called “largely non-operational,” and said members of those locations received advanced notice.
WeWork's plunge into bankruptcy was signaled most loudly on Oct. 3 when it said it wouldn't make interest payments on loans totaling about $95M, but it has been trying to restructure leases with landlords for the past six months to cut its expenses.
The company's financials improved in the first half of 2023, but not enough to stave off bankruptcy. It posted a net loss of $696M, down from $1.1B in the same period the year before. Occupancy across its 777 global locations was 72%, up from 70% the year before.
The company had $2.9B of debt and $13.3B of lease liabilities in late June, the latter down from $15.6B at the end of December 2022. But by August, it flagged there was significant doubt about its ability to continue as a going concern. Reports began to increase through the summer of the company failing to pay rent on some of its locations.
WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey and grew to be the biggest private sector office tenant in both New York and London.
WeWork’s growth was backed by Japanese investor SoftBank, which as of 2019 had invested $18.5B in WeWork, the company said. Since then, SoftBank also converted some of its loans to equity in the company.
WeWork planned to go public in September 2019. By that time, its annual losses had ballooned to more than $3B. But investors balked at the prospective valuation and the amount of control Neumann would continue to exert over the public company.
Neumann was ousted, leaving with hundreds of millions of dollars in cash and shares. Sandeep Mathrani took over as CEO with a remit of restructuring the company’s liabilities and making it profitable.
“As the co-founder of WeWork who spent a decade building the business with an amazing team of mission-driven people, the company’s anticipated bankruptcy filing is disappointing,” Neumann said in a statement Monday afternoon, before WeWork filed for bankruptcy. “It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before. I believe that, with the right strategy and team, a reorganization will enable WeWork to emerge successfully.”
The company eventually went public in 2021, backed by real estate firms such as Cushman & Wakefield and Starwood, but it never achieved profitability. Declining revenue due to the pandemic caused losses to climb to $4.4B in 2021.
Mathrani stepped down in May. David Tolley was tapped as interim CEO and on Oct. 16 was named permanent CEO.
“We are confident that David is the right leader for this pivotal moment and in his ability to drive WeWork’s continued transformation,” WeWork Chairman Paul Keglevic said in the Oct. 16 announcement.
