WeWork Reworks 3 More Leases As Landlord Negotiations Drag On

Coworking giant WeWork has struck renegotiated lease deals with landlords in three cities amid its push to emerge from its Chapter 11 bankruptcy restructuring as a leaner, profitable company.

The company has agreed to new deals at locations in Washington, D.C., Atlanta and Portland, Oregon, according to a motion it filed in its bankruptcy case on Tuesday.

WeWork said in a press release that it has now renegotiated more than 60 leases and saved $1.5B in future rent payments through its restructuring process, although it still has hundreds more locations that it must decide to keep or reject before it emerges from bankruptcy.

In D.C., WeWork restructured its lease with landlord Carr Properties at Midtown Center, a 14-story, 865K SF office building at 1100 15th St. NW, both reducing its rent and shrinking its footprint within the building. It signed a 110K SF lease at the property in 2019, which is set to lose its 700K SF anchor tenant, Fannie Mae.

It's the second bankruptcy deal struck with Carr after the coworking firm shrank its footprint at The Wilson office tower in Bethesda from three to two floors, Bisnow previously reported.

While WeWork has shuttered some locations in D.C. over the years, none of its leases in the metro area were among those rejected in the initial bankruptcy filing.

Carr Properties was named among WeWork’s largest unsecured creditors in its bankruptcy filing. It owed the D.C.-based developer $3.6M as of November. WeWork has agreed to pay back roughly $589K in unpaid rent at Midtown Center as part of the lease assumption, which still requires approval from bankruptcy court.

A WeWork spokesperson said that talks continued on WeWork’s other D.C. locations, but no decisions have been made. It lists seven other locations in the region as active on its website.

“While flexible work has dramatically transformed D.C. in recent years, desire for workspace in the center of the action is strong,” WeWork Global Real Estate Vice President Kate Harper said in a press release. “This new agreement cements our long-term partnership with Carr Properties and our commitment to the Capital, positioning WeWork to deliver solutions that power D.C.’s entrepreneurial and business community for the future.”

WeWork also restructured its 44K SF lease at 881 Peachtree in Atlanta, the office portion of the 28-story mixed-use tower developed in 2019 and owned by Hanover Co. and The Loudermilk Cos. WeWork shortened its term on the location, according to the court filing. A company spokesperson declined to give more details.

Loudermilk CEO Robin Loudermilk told Bisnow on Tuesday that WeWork's new lease, which was set to expire in 2032, now runs for one year with options to renew. WeWork also agreed to a nearly $178K cure payment, according to the filing, which Loudermilk said was payment for back rent.

“It’s encouraging that they asked for the renewal options, but we have no idea if they’re going to exercise them,” Loudermilk said. “We’d love to keep them.”

Loudermilk said WeWork's 881 Peachtree location is leased to a single enterprise tenant, which he declined to name.

WeWork previously asked the bankruptcy court to reject its 39K SF lease at The Interlock, a project 2 miles west of 881 Peachtree. A WeWork spokesperson said no other decisions have been made on existing leases in Metro Atlanta.

“Atlanta is a priority market for WeWork, and we’re pleased to have reached a mutually beneficial agreement at 881 Peachtree. As we continue conversations with our other partners in the city, we look forward to being part of the Atlanta community for many years to come,” the spokesperson wrote in an email.

The company leases three Atlanta locations from Cousins Properties, which are at the Terminus building in Buckhead, 120 West Trinity in Decatur and 725 Ponce in Midtown. Cousins Executive Vice President of Operations Richard Hickson said on an earnings call this month the company had stopped negotiating with WeWork at 725 Ponce because it was receiving interest from other tenants.

Cousins expects WeWork to reject that lease while it continues to work toward resolutions in Buckhead and Decatur that could reduce the locations by about 26K SF each and slash their rent obligations.

WeWork also reworked its lease at 830 NE Holladay St. in Portland, Oregon, with landlord American Assets Trust. WeWork reduced the lease term, the fixed rent and its guarantee, according to court filings. It is expected to be the only remaining WeWork in the city.

It also entered into a first-ever revenue-sharing model with the landlord, the only one of the three restructured loans to involve revenue sharing, WeWork's spokesperson said.

“WeWork is working towards revenue sharing and management agreements with dozens of landlords,” the company said in a press release. “These agreements enable WeWork’s landlords to share in the success of flexible workspaces within their buildings while minimizing the company’s exposure to fixed, long-term leases.”

WeWork still has a ways to go before all its leases have either been rejected or restructured. The coworking giant rejected some 92 leases as of Feb. 1, CoStar reported. It has said it needs more financing to pay its rent bills as the bankruptcy case trudges on.

Its payment of rent, or lack thereof, has been a sore subject for its landlords. 27 of which filed protests in bankruptcy court last month to force the embattled coworking platform to pay up. WeWork didn't pay more than $32M in January rent, withholding the payments from landlords who refused to negotiate.

But its bare-knuckle negotiating tactics appear to be working. All of those motions to compel WeWork to pay rent were withdrawn last week, a WeWork spokesperson said, and a hearing scheduled for Tuesday afternoon on the landlord protests was canceled.